Commons-based Savings Groups in Thailand

Guest author Michael Commons looks at the 'Wanakaset' currency solidarity community and its self-reliant economic system

< When you have neighbors who are free from debt and have ample resources, whether fish in their ponds, rice in their fields, herbs and fruit in their gardens, or money saved away, each community member is in a stronger and safer position. Desperation goes away and people see the world from a point of abundance. >

By Michael B. Commons, Wanakaset Network Member and Practitioner:

“Since I started engaging with small-scale farmers groups and cooperatives in Thailand roughly 22 years ago, I learned that savings groups were a key activity and benefit within them. While I have not well-studied the history of savings groups and how they were introduced, what I have learned is that this tool was introduced by locally engaged NGOs focused on community development and improving the well-being including economic well-being of smallholder farmers.

(To learn more about Wanakaset see Commons, M “A long term perspective- the Wanakaset Concept” Farming Matters June 2011 issue, pp 34-36; Michael Commons explains: n Thai Wana means forest- this is as word from Pali origin. Kaset means agriculture like Kasetsart University. So literal meaning is Forest Agriculture- but as shared this was a new term and in practice and philosophy - also include self-reliance.)

A brief history of the shift to industrial farming in Thailand and some key impacts

Many farmer elders and communities have shared with me a history of a common development and evolution that greatly shifted the conditions and situation for farmer communities. Starting in the 1960s new economic development policies in line with the “Green Revolution” pushed and promoted farmers to shift to and expand commodity crops and grow these crops in new ways using new seeds/ seedlings, chemical fertilizers, other externally sourced inputs, and growing them in monocultures. These new methods strongly differed from prior practices and relationship to the land, which were focused first on self-reliance, producing for the family’s needs of food and much more, with surpluses, often of a key commodity crop like rice, being sold for monetary income.

Suphap, a regenerative farmer friend now about 65 years old shared about how when he was young, not only did they grow rice a wide variety of vegetables and fruits within and around their rubber forest systems, which were abundant with wildlife including wild pigs and other game that reached the kitchen table, but they also grew tobacco, coffee, bamboo and hardwood trees for their own use. They lived with abundance both in their forest gardens and the wild forests around them. They sold some rubber and sometimes other forest yields like tree resins and wild honey for money, but did not need to purchase much. The main regular purchases for most families were salt and lamp oil with occasional purchases like school uniforms, a pot or pan, shoes, and a bicycle.

Money was little used and needed in this local abundance and community self-reliance. Aside from ample resources, the Thai tradition of “lohng kaek” or shared labor was practiced for major works and activities.

This was a similar situation in the other rural areas of Thailand. The policies that shifted this, seemed to radiate out starting with central Thailand and areas near key provincial city centers and gradually moving to more distant and less accessible areas, reaching and becoming a norm in almost every part of the country within the 1980s. My wife who was a child in the 1980’s experienced this ecological abundance growing up, learning to swim with the family buffalo herd, collecting edible snails and wild yams to share and sell, trapping jars full of fireflies to play with like a lantern, and foraging for wild fruits on the termite mound islands that were once a key and normal part of rice ecosystems, but by the time she entered high school things were already quite different.

This shift wherever it happened included a change in practices to use more inputs and grow less diversity, focusing on selling commodity crop yields for money and then using money to buy most everything. The changes effectively required clearing of more land (forest), and degraded local ecosystems and abundance. Then as farmers could not set the price for which they sold their commodity crops while they needed to buy more and more: seed, fertilizer, agrochemicals, pay for machinery and fuel, as well as now buying food and much more for basic needs, they often lost money and fell more and more into debt.

The emergence of savings groups

It was into this context that community development initiatives and NGOs entered in the 1980s and 1990s. Small-scale farmers were not easily able and not in practice to save money. They also were almost all holding significant debts and paying interest that was not serving them and at least some of this would be at very high rates from local moneylenders.

To improve their livelihoods, farmers needed to start to build up savings and capital and reduce debts, eliminating expensive extractive loans. At the same time, the interest that community members were paying rather than going outside the community could be circled and used within the community itself. And while Thailand thankfully has some government banks that provide more favorable rates and conditions for those who can access them, normal savings rates yield only about 1% interest while loans are at best around 8% per annum and usually more not including fees and conditions.

While the context may be different, after 20+ years being in relationship with such systems and seeing how well they work and how they can be transformative, I have wondered why I have not observed such in “developed countries” and believe savings groups could be a key simple measure to improve local economic sovereignty and start to weave threads of community self-reliance that can fit within the current economic system.

How does a “Savings Group” work?

While there are many groups and many variations, I will start from the savings group I know well that I am actively a part of with my wife. This is a savings group that we have in our local Wanakaset Network around the Eastern Forest. Wanakaset is a practice of forest gardening and self-reliance that as a modern system and philosophy was developed by Pooyai Viboon Khemchalerm but which builds upon a wealth of traditional knowledge and practices, and a long and strong relationship of Thai people (and peoples) with the forest.

All of us in the network are students of Pooyai Viboon, who passed away about 7 years ago. We all practice Wanakaset in different ways and forms. When Pooyai Viboon was still alive, the network would meet monthly at his residence / forest garden, but since his passing we normally rotate month to month between farms and communities. These monthly meetings are a chance to connect as friends and colleagues, to learn and share wisdom and experience, to bring and share food and sometimes seeds, seedlings, herbs, and more. In our rotating visits, we will take some time to walk and explore the lands and forest gardens of the host(s), during while we learn from the hosts, we share our ideas and knowledge- like recognizing (identifying their name and different uses and values) interesting seedings or wild plants and collecting fruits, seeds, seedlings and herbs to take back to integrate into our own farms. Sometimes we have more focused activities like working together to produce a key Thai herbal medicine, or learning a specific technique.

Within these meetings there is the savings group which all active members participate in. In our network now there are about 40 active members and about 30 join each monthly meeting.

From what I have observed and heard from others as well, for these savings groups to work well, there needs to be a strong dynamic of connection and relationship between the members and the group should not be too large. Once a group starts to get much larger than 50 persons, it may be better to split the group. As you may observe from reading above there is a strong level of connection and shared ideas and values within our group. Most groups are based in a very local context like the village, our group is a bit more spread out but we are all centered around the Eastern Forest and in a common bioregion. For Savings Group members to be eligible to receive a loan, they need to join our network meetings regularly. A failure to join 3 months in a row means that one becomes ineligible for loans, but in our context, we see this at a family level, so even as my wife officially holds the account, if I join or one of our children joins without us, this is participation and in viewing intergenerational continuity may be even more important.

For the equipment we have, there are small bank books for each member as well as official accounting ledgers for savings and loans. Information is updated in all of these each month in the savings group process at the network meetings. I think the critical aspect here is clear and transparent accounting having copies both centrally with the group and with the individual.

What is done with funds in a savings group

The savings group starts with savings, and for our group at the beginning of each year, each member sets a monthly amount they commit to save. This is a minimum of 100 THB (about 3 USD) per month, but it is often more like 500 THB. Viewing this from a starting point of farmers with limited income, debt and likely no savings, the savings commitment means putting aside a small amount each month that will build savings and benefits.

The amount saved each month, then also becomes the core capital that can then be lent out to members. If 40 members save 500 THB each, then there is 20,000 THB each month that can be loaned and as the collective savings build up and are cycled around, this capital also builds up.

For our group as far as loans, after a savings group member has saved funds/ joined meetings at least 3 times, they may seek a loan. For personal loans in our case, one is allowed to borrow up to 3 times the amount one has saved with the group. So if you have 3000 THB saved, you may take a loan of up to 9000 THB. Longterm members, who have saved many years, build up savings and thus become eligible for much larger loans. Prior loans need to be fully repaid before a new loan is given. The amount of cash available for loans is variable and limited each month. This includes the monthly savings and loan payments. When there is more demand for loans than funds, the group decides how to distribute considering the needs and situation. Often someone who requests but cannot receive funds one month will be given priority the next month.

Unlike with banks there is no fee for issuing the loan, nor is there any penalty for early repayment. The terms are 1% interest charged each month on the balance. Each month the member needs to pay the interest plus at least 100 THB. *Note at the same time all members need to continue to save at their committed monthly rate. If a member is saving at 500 THB per month and took a loan for 9000 THB, the next month would need to pay 90 THB in interest, 100 THB to reduce the loan, and 500 THB for savings or 690 THB. The following month with a loan balance of 8900 would mean only 89 THB in interest.

Aside from personal loans, farmers together, normally as part of a small community enterprise, can request loans. These loans no longer become limited to 3 times the personal savings, but are also the collective responsibility of the farmer members involved- normally 3 or more farmers. The loans and their purposes need to be reviewed and approved by the Savings Group committee (being active farmer members who take on this role to review and monitor the Savings Group). These loans are almost always for capital investments that will support community enterprise development, such as a small rice mill for a group that mills and sells their rice, or sugar cane press for a group making their own organic sugar. In our context these investments should support accessing and increasing value in line with Wanakaset principles of working with our natural resources and knowledge to build self-reliance and local economy.

For our group now we have a collective savings of over 1 million Thai Baht (about 30,000 USD). While most of these funds are lent out and circle with the members, sometimes we have funds that are just saved between months. In any case the normal interest would be about 10,000 THB to work with.

First each year 2 farmer members volunteer/ are chosen to take on the role and responsibility of managing accounting, receiving funds, and payments. They need to join every meeting and between them manage this work during the monthly meetings. For this they receive a total of 500 THB. (500 THB is a common daily wage in Thailand for basic work.)

Then the next priority is that the network with these funds helps to support the cost of joining the meetings for all members/ communities. As we live around the Eastern Forest depending upon where we are meeting, we may need to travel up to 2 hrs. Depending upon the distance, each group- community joining is given money to help support their cost (fuel for the group to carpool). This may total 4000- 5000 THB. Having this support makes joining together for exchange and learning viable without needing external NGO or other funding.

So then about half of the interest/ earnings will remain. The normal process is to review at the end of the year the total earnings for the Savings Group and decide on usage/ distribution.

Some will go to a group fund used for development activities. Some may go to the herb fund, used to make herbal medicines we use and value. The herb fund, while focused on supplying our families with valuable herbal medicines we make together and use, can also generate income when people outside our group receive medicines and donate. Now after years and with enough funds, the group also provides a bit of supplementary support to members in the case of hospital stay (200 THB per day- up to 6 days) and support may also be given as determined by the group if a member or his/her direct family member dies.

Then some is distributed as dividend / interest on funds saved. In recent years this has been about 3% per year, as our group priority is on group activities and benefits, but this is still 3 times normal savings at a bank.

Other savings groups, like the local group in my village and in the Pawa community, do much less in terms of member/ group benefits but return more in dividends/ interest. My wife said that our village savings group normally returns about 7-8% in interest.

Savings group management and addressing real life challenges

With each meeting in November before the new year, roles are chosen, including who will manage accounting for the year to come and then who will participate in the Savings Group committee. For the Savings Group Committee, basically everyone who has experience with this and is an active and regular member is welcomed to be on the committee (about 10 persons).

The committee doesn’t have much regular work but is responsible to make the decisions for group/ community enterprise loans, and anything else requiring review.

The group does not charge any fees or penalties. The system and group do not work with formal legal contracts. While there is full clarity and transparency on how this works and documentation of savings, loans, and payments, the whole process being visible and known to the members, the glue that enables this to function well is the social relationships and cohesion. Defaults are very rare, but there are times when stuff happens, and then the group works to both find a solution and support the member who may be challenged (to pay).

Many of these savings groups were started in farmer groups, women’s groups, cooperatives, and other initiatives that all have community development objectives, including helping farmers to reduce debt, and build their economic strength. So while the Savings Group is a component of this, it fits into the work we are doing with our land, in our family and community enterprises, etc. all of which if proceeding well, should be working to move us into greater levels of family/ community self-reliance and ecological abundance.

A wider view of wealth and value

Wealth and exchange, very much so in Wanakaset, but also still much part of the Thai community culture where it is maintained, is by no means only monetary. Already as described when we meet, we bring and share our rice, dishes, and snacks together. This is normally food that we have grown and harvested from our land. Then we may bring and share seeds, and seedlings. When we make Thai herbal medicines, like “Ya Khiow” which includes 53 different herbs, we all together work to grow/ collect these herbs and bring them together as the core raw materials, purchasing the few ingredients we cannot grow. We don’t only share but also can and do sell each other products from our system. Many of us produce seedlings for market and have significant yields of fruits like durian, mangosteen, bananas, and herbs like turmeric and yellow ginger. Our group works as an internal market. I much prefer to buy organic durian from my friend than conventional durian from the market, and we buy ingredients from each other for natural / herbal products we produce. We also have relationships with larger markets that recognize our Wanakaset agroforestry production system with generally more demand than supply for crops that are sought. We share but also sell knowledge, many of us being skilled teachers in how to practice agroforestry, Thai medicine, in how to make natural cosmetics or organic biofermentations, and in local biodiversity.

What all of this means is that if a member has a loan for 20,000 THB and has had a difficult change of circumstances, aside from the group being understanding in working with this, this Wanakaset member almost certainly has resources of value, and or could produce more. So we can help this person to generate value (and money) to repay the loan, maybe in fruit, herbs, seedlings, natural products, helping with training courses, or something else.

The limited cases that I recall of debts that have to be set aside (defaults), have all been for members who have left the network and local community moving somewhere else and out of contact.

For our group, members are encouraged to continue to build their savings which builds our collective capital and thus more funds to loan and more interest to work with for our group activities and benefits. If a member wishes to withdraw savings, this should be done at the end of the year cycle, but if the member will continue to be active and maintain benefits then it is viewed as unfair to withdraw all funds as without the capital and interest accrued the group cannot provide these benefits. If a member however wishes or needs to exit the group/ move to another part of the country or world, then it is best to withdraw all savings and clear all loans. The group does include some members who are in a more supporting role who may only join once or twice per year and save funds, but never take loans. These are people who have connections with the group and support Wanakaset principles and practices, but do not live around the Eastern Forest and may live in Bangkok. I think in the initial development of such a group, supporting members like this can play a key role helping to build some initial working capital that cycles and works for the group.

Unlike with the Wanakaset savings group, for the savings group in our local village, loans are for one year and must be repaid in full after the year. This seems to be much more problematic from what I have heard. While such loans can make sense and work in line with a harvest period for farmers, meaning we take a loan before the planting cycle and repay the loan after harvest when income comes in, the reality is that most villager- farmers now have different income sources and regular daily, weekly, and monthly expenses. When it comes time to repay the full amount, often the member does not have these funds. What they often do is borrow the money from a local informal moneylender (normally at least 3% minimum interest- for one month) which they use to repay the loan. (Such local moneylenders could be called “loan sharks” as they charge 3% or more per month, although I think they are no worse than predatory institutional lenders.) They then request a new loan and use this to repay the moneylender.

With the Wanakaset savings group the obligation is regular payment of interest plus at least 100 THB towards the balance. This is very manageable in terms of monthly income and also means that the interest never compounds and the balance is always decreasing at least gradually.

Collective Benefits and Strengthening Community Relationships

In all savings groups I know, the interest, being the main cost of loans, is not going outside the community but is being circled between members. In my view however the groups that are much more interesting invest a significant amount of this interest / earnings toward collective benefits and work. This could be toward a piece of shared capital- like a small tractor shared between members. This could be for cultural and community engagement- like an annual festival. It could fund a journey to learn together from another community. This can be for insurance like benefits such as to help with medical emergencies or a loss in the family. In all of these cases, the collective use of these funds follows principles in line with commoning. Sometimes what is purchased is very directly a collective asset that is managed and shared by the commons of the membership, but even if the funds help generate an experience like a festival or a journey together, these decisions are made by the collective and the scope of beneficiaries also centers around the collective, although the collective may decide to welcome wider community. This tool, and use of a portion of the interest from loans for collective goods, gives those involved full choice to invest where they see fit, free from government or other funding support and the conditions / intentions that usually come with it.

With the Savings Group a key condition and factor for success is the close social relations and meeting together on a monthly basis. These regular meetings, even if not as focused on collective learning as in the Wanakaset Network, always invite a level of exchange and relationship building. This will in my view and experience naturally help produce opportunities for use and exchange of resources and knowledge. Wastes and byproducts may be needed and valued by another. People come to learn of each other’s knowledge, skills, and needs- and so one may find a babysitter, a language teacher, someone to hem a garment, and much more.

Then what may be even more important and valuable which I have observed is that from this foundation, the group/ community/ network with good relationships and knowledge of the capacity, resources and needs of others, is ready to rapidly address crisis challenges.

Recommendations for application of the Savings Group model

The core functionality centers around being a group of people who are connected and share some common goals, concerns and interests. Through being centered in a common place, like a village or neighborhood, or through other regular connections, these are people whom you would be happy and likely to bump into with some regularity. In many cases the savings group emerges from an existing group with relationships, such as a farmers group, women’s group, or cooperative.

I think this could start from a parents’ group, from a local neighborhood group/ association, link to groups that share skills, work to collectively manage valued places and resources, volunteer together for a local non-profit, or otherwise connect with some common motive and interest for the betterment of community, humanity, the planet and themselves.

Size seems to matter, with about 50 being the maximum for one group before dividing. At the same time there needs to be enough people both to build the capital and for all to feel responsible towards a larger collective. I would guess there should be at least 10 persons. The loan process should never feel like a personal loan, but always be understood that this money comes from the collective. One should feel indebted and responsible to all involved, as well as supported by and collaborating with all involved. This is a very different relationship than a personal loan from a friend or family member.

As seen with the Wanakaset savings group model, the group starts with savings, and requires all joining to commit to saving each month with the group, building up collective capital and all being invested in this together.

Meeting together regularly is key both for the savings group to function, as well as the many other benefits. Meeting monthly seems to be the right frequency for most, and I think this works best when the group already has motivation/ reason to join together. So for a parents’ group a chance for their children to play together and to discuss about how to make the community and school better. Could be joining together for yoga, joining together at a community garden, joining to help each other repair goods and share tools and knowledge.

Then the process needs to be transparent and visible to all and documented. Those who do additional work, like the persons who take on the monthly accounting role, should receive some compensation for their time and effort. The decision-making process should be collective, but also as with the Wanakaset group, be clear and require being a good committed member. So someone who is just joining for the first time or who does not join regularly, should not be involved in the collective decision-making process.

While joining regularly is key to the success and cohesion of the group, providing some level of flexibility, like how in the Wanakaset context, membership is seen on a family level with any family member of the same household being welcome to join the meeting, facilitates continuity.

Members who will leave the community / group such that the regular relationship will not continue, should clear loans and be welcomed to withdraw their savings.

It becomes more interesting, when the groups/ members get to know each other better, including their knowledge and resources, and the group can become a nodal point for more exchange and sharing of skills and resources. With this the community and members become more self-reliant, exchanging and sharing value, saving money from lower expenses while more value is kept and cycled in the community.

Variations:

The Nature Care Club, an organic rice farmer group with its own rice mill, provides a banking service to its community. This community enterprise is required to borrow money every year to stock paddy rice at harvest time. Normal interest rates would be 8- 12% per year from banks and government funds. As mentioned above banks in Thailand are normally paying only 1% annual interest for savings. The Nature Care Club offers savings accounts to community members. They give 3% interest to a normal savings account. They give 4% interest to those who agree to save for a 12-month period. There are no other benefits with these accounts.

The Mae Tha Sustainable Agriculture Cooperative savings group for loans (of larger amounts) requires the member to explain what the use of the loan will be for and find 2 other members to support this use. These members have some responsibility towards this loan as well. Uses that are approved need to be good investments for the farmer (such as improved water management or purchase of land). The member making the investment needs to negotiate costs (such as for digging a pond). The member then requests the amount required. The Savings Group pays this amount to the provider. (The backhoe operator or such) By having the member not receive the money directly, this prevents the risk that funds may be approved and then the member has another urgent need (such as fixing a vehicle or a hospital stay) and uses the funds for this other purpose. Prior experience found this could happen and then the farmer was not better off and often unable to repay a loan for a large amount which was detrimental to the group. The 2 fellow members who give support could be required to help pay off their colleague’s lean if he or she fails to pay, but more they provide support for the development of the project of their farmer colleague. This means a greater chance of success and motivation to move forward.

A group in Pawa, Chantaburi allows one to save from minimum 50 Baht per month to maximum 500 B/ month. This maximum was put in place as they return 70% of earnings to members (normally about 7% annually). They found they were getting too much savings from some and they wanted to distribute benefits more evenly. This group also allows one to borrow up to 3 times money saved, but if a fellow member wants, their savings can also be used as collateral. Thus a member with a savings of 10,000 Baht needed a loan of 50,000 Baht, could ask a member with 7,000 B or more in savings for this type of assistance to enable the loan.

The Alternative Agriculture Network of Chachoengsao helped set up many local savings groups several years ago. Now many of these village level groups have very large savings amounts (up to several million baht). In such cases, it is common that the need to borrow is less than the amount of savings. While typically in such a case, the group would take the difference and put it into a regular bank savings account to keep the money safe and earn a bit of interest, this is less interesting both in the earnings and in the community development aspect. As these many village level savings groups are linked under the alternative agriculture network in Chachoengsao province, they can and do lend to each other. In this case there is a larger network structure (like at Wanakaset Network) where every village savings group sends three representatives to larger provincial level meetings. They have common dialogue and they share the common goals of developing alternative (sustainable) agriculture. It would seem like a network of local (village/town) permaculture savings groups could be linked in a network at a county or state level. If they have similar principles and guidelines and periodic meetings with representatives of each group, they should be able to link on this level smoothly. This network in recent efforts to support renewable energy and local energy sovereignty, is providing loans to members for solar energy systems, which require a major upfront investment but then pay off in only about 4- 5 years. The systems are also built by local farmer technicians, generating income and technical capacity in the communities themselves.

Concluding Note

In the principles of Wanakaset and Self-Reliance, while developing our own economic strength and natural capital (on the personal and family level) is the starting point, building community strength, community natural capital, exchange and community enterprises is the next level. When you have neighbors who are free from debt and have ample resources, whether fish in their ponds, rice in their fields, herbs and fruit in their gardens, or money saved away, each community member is in a stronger and safer position. Desperation goes away and people see the world from a point of abundance.