For the past 30 years microfinance has been a credit focused industry and few organizations were allowed by regulation to offer savings products. However, as more MFIs are becoming regulated institutions, there is an opportunity to help customers build financial stability in their lives by offering savings accounts. WWB research shows that the poor save, generally in small amounts, an estimated 10 to 15 percent of their monthly income. The need for formal savings options is crucial: without them the poor are forced to keep cash at home or in informal savings groups which are risky and money can be lost. Access to reliable savings can help the poor reduce their vulnerability to major budget shocks, invest in the education of their children, and build assets that will see them through old age. Because women tend to be the savers in most poor households, a well-designed savings product can have significant empowerment benefits for women. For WWB network member MFIs there is a business case for offering savings. Introducing savings allows MFIs to diversify their funding base to include less expensive, more stable funding with no foreign exchange risk. Research shows that deposit-taking institutions fared better, facing fewer liquidity constraints, in the global economic crisis. This long-term sustainability ensures that MFIs will continue to serve both credit and savings customers well into the future. The main challenge to offering savings services to populations that save relatively small amounts is cost. A key to success will be using alternative distribution channels, such as mobile phones and correspondent banking, both of which WWB is integrating.
With support from the Bill & Melinda Gates Foundation, WWB is working with four institutions to either introduce voluntary savings or modify existing savings products to better serve the needs of women. WWB works with MFIs to design products specifically to enable poor women to save, and uses marketing and financial education campaigns as tools to encourage women to set savings goals. For example, research with network member Kashf Microfinance Bank (Pakistan) has shown that women value security, convenience and confidentiality when it comes to a savings account, and they are using informal mechanisms to save for specific goals, such as their children’s education and marriage and emergencies. To motivate customers to save in the bank, Kashf is launching a commitment savings account whereby customers save for a particular goal and then choose the amount and the duration in order to realize that goal. Mimicking the informal savings groups ubiquitous worldwide, this product helps low-income people achieve their goals in a way that is also sustainable for the bank.
There has been an unserved market that is an important part of the poverty alleviation equation: girls and young women. Many girls in the developing world leave secondary school before completion. Even if they complete school, their opportunities for economic independence are minimal, with options typically limited to working in the informal economy or marrying at an early age. WWB created a pilot program to design and deliver savings products and financial education to girls and young women aged 10 to 24. The program was rolled out in 2008 with network members XacBank (Mongolia) and Banco ADOPEM (Dominican Republic), with support from the Nike Foundation as part of the Girl Effect. The accessibility of savings products and financial education programs tailored to low-income girls has significant implications for their economic and social empowerment. By cultivating an understanding of the importance of saving, building saving habits, and opening savings accounts which they control, girls develop skills in asset accumulation, risk management, and goal setting, making them better equipped to plan for the future. WWB believes this will lead to an increased tendency among girls to pursue higher education, create businesses of their own, or become property owners- all of which have broader implications for reducing poverty. Research showed that girls as young as 10 regularly accumulate money, actively manage it, and want a safe place to save it. However, girls need to understand the "why" and "how" of saving before they will open accounts, reinforcing the importance of the educational component. Girls want financial literacy, but changing their behavior is a gradual process requiring multiple points of reinforcement over time. The pilots also showed that school-based models are most effective in reaching large numbers of girls, with support from administrators, teachers and parents essential. Like adults, girls want a choice of products, accounts that are easy to open and use and a branch that is accessible. Furthermore, WWB has been able to demonstrate the lifetime value for MFIs and banks to target this segment, including several of WWB's network members who have expressed an interest in expanding their product portfolio to include savings for girls.
WWB is piloting the use of social communications as a method for increasing savings in the Dominican Republic by developing a television series in which savings is a recurring theme alongside the typical storylines of love, feuds and family dramas. WWB is collaborating with Puntos de Encuentros, a Nicaraguan NGO with a proven track record in using a TV serial drama to effect social change. WWB believes that traditional methods to change financial behaviors have had limited efficacy because they do not tackle the underlying issues of financial control at the household level. In addition, these methods have not been delivered in ways that enable people to learn and decide to change their behaviors. The soap opera will be the centerpiece of a nationwide savings education campaign in the Dominican Republic through our local network member, Banco ADOPEM and its NGO.