Harare, Zimbabwe – It was two days before Christmas in the low-income neighbourhood of Mabvuku in Zimbabwe’s capital Harare. Music played, people chatted and most were in a festive mood.

But not the small group of women marching down a narrow, pothole-ridden street on their way to the house of their savings club’s treasurer. They had a much more serious matter in mind.

The previous day, the women were meant to share out money they had been saving together for the last six months to use for Christmas shopping. But when they called the mobile number of their club’s treasurer, they got an automated response: “The number you have dialled is not available.” They tried his number multiple times, but to no avail.

Informal savings clubs have gained popularity in Zimbabwe in recent years, especially among women and people in the informal economy who may not trust banks or have access to traditional savings and loan options, experts say.

Known locally as mukando, meaning contribution, these clubs usually have about a dozen members who come together to save money.

Some clubs have a central member who collects everyone’s contribution and keeps it until the saving cycle has ended, after which it is distributed. Throughout the cycle, members are allowed to borrow money from the pot and pay it back to the club with interest.

In a slightly different version of the savings club, contributions are collected and the full amount is given to a different member at certain intervals. When the member pays back the money, they do so with interest.

In both cases, the interest gets added to the full pot of money, which is then shared out at the end of a savings cycle – letting members get their original savings with an extra amount added.

While many who join these clubs find this system an essential source of support, these clubs are also unregistered, unregulated and depend on good faith between members, something experts say, leaves members open to being swindled.

‘I regret it’

One of the women marching down the street in Mabvuku that day in December 2023 in search of her saving club’s treasurer was Carol Madzimo, a 24-year-old hairdresser from the area. She had joined the club together with her mother so they could save money for Christmas groceries.

“My aunt invited us to join the savings club,” Madzimo told Al Jazeera. “The savings club was supposed to run from July to December, at which point we were supposed to share the money we had been contributing to the club every month [plus the extra earned from interest].”

But things didn’t go quite as planned. The treasurer, who had all the money the 20 members had been saving for six months – $1,200 – plus an additional unknown interest amount, disappeared on the day they were supposed to share out the proceeds.

That’s when some of the members, including Madzimo, decided to go to his house to confront him.

“Christmas was just two days away and we hadn’t received a single cent to buy the Christmas groceries we had saved so hard for,” Madzimo told Al Jazeera. “So you can imagine the frustrations we carried to the treasurer’s house that day.”

The treasurer, however, was not home. His wife said she hadn’t seen or heard from him in two days.

The savings club was in disarray; nobody knew what to do. Some suggested filing a police report, but the club never followed through because people were hesitant to report a fellow member of their community to the police.

It was already well into January before the club heard from the treasurer again. “He gave us an excuse for his unavailability,” Madzimo said, adding that what he said “made no sense”.

It turned out that the treasurer had been using the members’ savings and the interest money for his own use, Madzimo said.

She wasn’t sure exactly how much interest was accrued because the treasurer kept all the books, and the other members had simply trusted him.

Eventually, he returned to each member the amount they had input over the six months – $60 – but did not give them any of the profits from the loans or interest.

“I regret [joining the savings club],” Madzimo told Al Jazeera, upset at the ordeal they all had to endure.

“However, at least I got back all the money I put in as monthly contributions,” she added. Tanaka Mutyori, who joined a different savings club, wasn’t as fortunate.

‘I thought it was a good idea’

In 2023, Mutyori, 26, used to run her own business in a building in Harare’s city centre. “I had my own thing going,” she told Al Jazeera. “I sold drinks and refreshments from big fridges. Business was booming!”

But things took a turn after Mutyori joined a savings club last April. “I joined a savings club in the building I ran my business from. I used to contribute $50 every week.”

The club was supposed to save money for a period of 18 weeks and share the savings equally among its five members. It was also supposed to distribute the interest gained from loaning out money to members throughout the saving period.

“Before I joined the club, I witnessed some members buy cars using money they got from the club, so I genuinely thought it was a good idea,” Mutyori said. After she joined, however, when the time came to share the club’s money, the group’s leader kept shifting dates.

“Initially, we were supposed to share the money on Heroes’ Day [August 12], but the leader kept changing the date. It wasn’t long till we came to the conclusion that he didn’t have our money,” Mutyori lamented.

When the club confronted him, the leader said he had lent all the money to his pastor at church who had not given it back. This was last year. “We are now five months into 2024 and club members are yet to receive their money,” said Mutyori. However, sometimes she does receive small amounts from the club’s leader when she desperately needs money. “I am subtracting the small amounts he gives me from the money I am owed, which is $950,” she said.

Mutyori said joining the club really set her back. “I was planning to use the lump sum I was supposed to get in August last year to boost my business. But after I failed to get the money, everything just started going downhill.”

One of her big fridges was taken by the management of the building she was renting space from when she failed to pay rent. Her business crumbled and she now works for someone else. “I hope to get back on my feet soon,” Mutyori told Al Jazeera. “But for now, I’m working for someone, so I can save up and get back to being an entrepreneur.”

Protecting funds

Women and people working in the informal sector participate in savings clubs the most, Zimbabwean economist Prosper Chitambara told Al Jazeera. One of the key motivations for joining is access to investment capital.

“These savings clubs are making it possible for people to mobilise savings within a group, for lending to each other, either for investment purposes, to invest in businesses or to expand their businesses or even for consumption,” said Chitambara.

Savings clubs have well-documented benefits, he said, so people are eager to join them.

“A number of scholars have done studies to try and explain some of the motivations behind these savings schemes. Some actually argue that individuals use their participation in these savings schemes as a mechanism to commit themselves to save money and deal with self-control problems.”

Other scholars, Chitambara said, argued that individuals with no access to formal credit may choose to join informal savings groups to finance the purchase of various types of property. In Zimbabwe, one of the biggest benefits of savings clubs, according to local press, is that they protect members’ funds from neighbours, family and friends who may be prone to asking them for money.

LynnenMary Katiyo, a 21-year-old who sells clothes in Harare’s city centre, is part of a slightly different savings club. “Our money is not kept by a treasurer,” she told Al Jazeera. “Every month, we each give $100 to one member of the club. There are six of us and we take turns to receive the lump sum.”

Katiyo, however, warned that even under such a system, there can be problems.

“Someone can join the club and leave as soon as they receive the lump sum, especially if they are among the first people to get it,” she said. “This will result in a loss for the group because one member will have taken way more than they would have contributed.”

‘Undocumented dealings under a tree’

One of the reasons informal savings clubs are blossoming is because common people don’t have trust in Zimbabwe’s formal banking sector, economist Chitambara said.

“In Zimbabwe, there is a general lack of trust and confidence in formal banking institutions by a lot of people. And in any case, our economy is largely informal. So most people in the informal sector don’t actually save money in formal banking institutions. They prefer to save using these informal banking systems,” he said.

A major reason for the lack of trust in the formal banking sector is Zimbabwe’s history with an unstable currency, says a post on the Bankers Association of Zimbabwe’s website. The same post also contends that confidence in the banking sector has been hampered by a number of bank failures. Since 2003, there have been at least nine failed banks in Zimbabwe.

Unlike formal banks, informal savings clubs give loans to members without them needing to put up collateral, making this preferable for many.

Moses Mavhaire, a Harare-based lawyer, however, warned savings clubs against giving out loans for interest, saying they are not legally mandated to do so. He told Al Jazeera he was aware loans given by these clubs benefitted many people who do not qualify for bank loans. However, he said, “There is no substitute for the law. You cannot substitute the law for convenience.”

None of the savings clubs Madzimo, Mutyori and Katiyo joined has legally binding documents. Everything is done in good faith, through verbal agreements and on WhatsApp.

There is a serious problem with this type of arrangement, Mavhaire said, explaining that fraud cases relating to mushrooming savings clubs are a nightmare to prosecute due to a lack of legally binding documents.

“It’s always advisable that there should be paperwork [in savings clubs]. Of course, you can go to the courts and claim that you gave so and so your money, but it will be your word against theirs,” Mavhaire said.

Arrangements by savings clubs should be documented in a contract or trust agreement with clear rights and obligations of parties, he added.

“People should not be appetised by shortcuts,” said Mavhaire. “Having undocumented dealings under a tree can seem lucrative but this has longstanding consequences, especially when it comes to enforceability.”