Abstract:
The study aimed to evaluate savings groups and formal banking in Sub Saharan African (SSA) countries with respect to the impact of savings groups’ composition and status, performance and bank-specific factors on access to formal banking by the savings groups. The study used secondary cross-sectional data (latest by 31 July 2024) for a sample of 36 SSA countries from the Savings Group Information Exchange (SAVIX) dashboard, International Monetary Fund (IMF), World Development Indicators dataset, World Bank’s Global Findex and Trading Economies website. Ordinary Least Squares (OLS) regression analysis was used as an estimation method. The study revealed that, on the impact of savings groups’ compositions and status on access to formal savings by savings groups, average savings per member had a negative and significant impact on access to formal savings and average loan outstanding per group had a positive and significant impact on access to formal savings by the savings groups. Bank concentration had a negative and significant impact on access to formal credit and ownership of mobile money account had a positive and significant impact on access to formal credit. Group composition and status indicators such as percentage female members per group (gender dynamics) and average number of members per group had insignificant impact on access to formal credit and savings by savings groups respectively. The study revealed that, on the impact of groups’ financial performance on access to formal savings by savings groups, average savings per member, mobile phone used to send money (% 15 years and above) and average loan outstanding per group had a positive and significant impact on access to formal savings. Bank concentration, number of borrowers from commercial banks and average number of members per group had negative and significant impact on access to formal savings. On the impact of group performance on access to formal credit, bank concentration, average savings per member, bank account ownership and average number of members per group had a negative and significant impact on access to formal credit by savings groups. The group performance indicator namely return on savings had statistically insignificant impact on access to formally savings. The study revealed that, on the impact of bank- specific factor on savings, average loans outstanding per group had a positive and significant impact on average savings per member. Percentage of members with outstanding loans had a negative and significant impact on average savings per member. The study revealed that, on the impact of bank- specific factors on average loan size per member, average savings per member had a positive and statistically significant impact on average loan size per member. All the bank- specific factors namely bank concentration, deposit interest rates, mobile money account ownership, mobile phones used to send money (% 15 years and above), bank branch network number of borrowers from the commercial banks per 1000 adults and number of ATMs per 100, 000 adults had insignificant impact on average savings per member and average loan size per member. Based on the findings of the study, it is recommended that there should be strong partnerships between banking institutions and mobile money service providers to provide savings groups with affordable formal banking products. Development actors should avail financial and digital literacy programs for savings groups to promote good financial behaviours and digital skills among savings group members.
