FAO actively discourages groups from seeking or accepting credit until they have demonstrated their ability to save. Groups in Sri Lanka often begin by saving in kind. Members each bring to their weekly meetings a small bag of rice, which is collected and later sold. The earnings go into their group fund. When a group has enough cash, its group promoter takes them to meet the local bank manager and open a savings account, used to meet emergency expenditures, cover group running costs and provide capital for group enterprises.
Regular saving has another important advantage.
It prepares the groups for the responsibility of handling credit - bank loans, which they invest in starting up and expanding group enterprises. Delivering credit to groups makes sense both for banks and the poor. Few banks have the time or staff to process and supervise very small loans for individual farmers. But these tasks are simplified when the farmers join together and take out a medium-sized group loan. Transactions costs are also lower for the group members - they need to prepare only one loan application and make a single trip to their local bank.