Saving Up for a Rainy Day? Savings Groups and Resilience to Flooding in Dar es Salaam, Tanzania

Abstract

This paper explores the role of savings groups in resilience to urban climate-related disasters. Savings groups are a rapidly growing phenomenon in Africa. They are decentralized, non-institutional groups that provide millions of people excluded from the formal banking sector with a trusted, accessible, and relatively simple source of microfinance. Yet there is little work on the impacts of savings groups on resilience to disasters. In this paper, we use a combination of quantitative and qualitative evidence from Dar es Salaam (Tanzania) to shed new light on the role that savings groups play in helping households cope with climate-related shocks. Drawing on new data, we show that approximately one-quarter of households have at least one member in a group, and that these households recover from flood events faster than those who do not. We further argue that the structure of savings groups allows for considerable group oversight, reducing the high costs of monitoring and sanctioning that often undermine cooperative engagement in urban areas. This makes the savings group model a uniquely flexible form of financing that is well adapted to helping households cope with shocks such as repeated flooding. In addition to this, we posit that they may provide a foundation for community initiatives focusing on preventative action.