Resources solution for SMEs

Banks should thus engage the informal sector players and embrace the idea of fostering partnerships and clusters.

Under this plan, informal sector players, through the assistance of banks or other arrangements pool their resources by bringing their capital and expertise together to make a meaningful investment.

This also allows them to gain knowledge, further their skills through knowledge transfer from their partners than when operating as individuals.

If small traders come together to work as a group, they can register their associations to assist in easily identifying their location, assessing their challenges and also make banks aware of their existence.

Most of the informal sector players can save only small amounts individually, which are usually not enough to invest in productive resources. One way to circumvent this problem is through pooling resources together as a group.

By saving as a group, there is potential to accumulate a larger amount of money more quickly by pooling their savings in a common fund which can then be used by the group or a member of the group for productive investment.

Pooling resources as a group is one of the methods that members can use to cushion themselves in hard times.

Savings groups allow members to shed the pressure placed on their free cash by husbands, neighbours and friends. Ultimately, this enables people to commit their surplus cash towards future purchases with the potential to improve their quality of life.

If members of a group are able to self-organise, it is possible for the members to build enough resource base. This can then allow the members to learn basic financial skills.

As a group, they can more easily receive literacy and money management training from group promoters or trainers from NGOs, and also learn from other more literate members.

Low level of literacy and numeracy skills make it difficult for the poor to keep track of their savings and to manage their money.

Pooled resources can be used to cushion members against vulnerability to risks like bad harvest, food shortage, sickness, flood, income shortage,

By saving as a group, these risks can be shared between the members. Individual members can rely on other members for help in times of need.

Group savings can be used as an insurance scheme to help members deal with these emergencies when they arise. Pooling resources can assist members to access safe saving facilities, such as banks. By saving as a group, the informal sector players can create a safe place to put their money.

Some group saving methods does not require storing at all, since the money is immediately redistributed after collection.

The group can also buy or make a cash box that will be safeguarded by several members which will periodically be deposited at the bank. Saving requires discipline since it means withholding something for future use instead of consuming it right away.

All group members must have discipline and agree on a common set of rules to follow. If the rules are not enforced, then all members suffer.