Self Help Groups (SHGs) have three main sources of money: members’ savings, grants and loans. This is a critical area to address for the group to achieve its goals. Many groups problems and reasons for disintegrations are as a result of financial mismanagement.
The following tips will help you manage group finances prudently and avoid money-related wrangles:
- Open and maintain a bank account: Group money should not be kept by individuals. A bank account is the safest place for group money. Be careful, though, to open an account with a bank that is friendly to a SHG, i.e. one that has minimal fees for operating the account.
- Keep and update financial records: Every coin received, issued and used by the group should be accounted for. The group treasurer, with the help of a few selected members, must keep updated records that are in tandem with bank records.
- Have a strict monetary policy and adhere to it: Any more spent or issued to members, suppliers, consultants and so on should have the approval of group members. Members who fail to pay loans should not be issued with new loans. There are just a few of safeguards against financial mismanagement.
- Make sure bank account signatories are honest and accountable people: Most banks require the chairperson, secretary and treasurer to be the signatories of the group bank account. If the three officials lack integrity, they can conspire and embezzle group funds without members noticing. Consequently, vet thoroughly individuals you intend to make bank account signatories. If any of them is found to be dishonest replace that person as soon as possible.
- Have a budget and implementation plan for every project: Before spending money on any project, come up with a project. Make viable plans, including a budget. Even of you intend to lend money to members through your Table Banking structure, plan ahead.
- Spend group finances on the intended purpose: Stick to your plan and budget while implementing the project you chose. Unless there are serious risks that the project will not succeed, stick to it. Invest your money as intended.
- As much as possible Have one loan at time: This is especially important when the group is young. Having multiple loans strains the group especially during hard economic times. Even if you come across a cheaper loan while you are servicing another one, repay fully the first loan before applying for another one.
- Pay loan installments before or on time: Do not wait until your creditors come calling for you to pay your loan. Before you spend or share your profits, pay your loan. This will keep you in the good books of your lenders hence increasing the possibility of getting more loans in future.
- Keep group members, lenders and donors updated through regular reports: Whether you are spending members’ savings, loans or grants, prepare and disseminate reports regularly, preferably monthly.
Remember, prudent financial management contributes immensely to the general success of your group.
