On October 31, 1924, at the International Thrift Congress in Milan, delegates proclaimed that “Saving constitutes a virtue and a practice which are essential to the civil progress of each individual, of every nation, and of the whole of humanity!” Since then, October 31 has been celebrated as World Savings Day as a way to motivate people around the world to save.
What do people value about savings? Financial inclusion practitioners often think in terms of the number of new accounts and the amount of money saved. When we look at it from the perspective of individuals, however, the answers are more varied and nuanced, and almost never about money itself.
For Emelyne, for example, a young girl in Burundi living with her four siblings and father, participation in a village savings group not only enables her to pay school fees, but it is a source of much needed encouragement and support from others in the community.
Embet is a 38-year-old divorced Ethiopian, supporting her daughter, nephew and aged mother. Participation in a village savings group has enabled her to send her daughter to college, buy a cell phone and to dream of one day building a house for herself.
For Therese in Côte d’Ivoire, who is a 43-year-old mother of six children, saving money in her savings group has allowed her to start a food business that generates enough income to buy food for everyone in the family.
While many poor people want to save money, in Sub-Saharan Africa only 29 percent of all adults have an account at a financial institution. Without a safe, reliable place to store small sums of money, people use unreliable, informal mechanisms to save. Banks are too far away, and the time and cost involved in travelling to one of them is prohibitive.
The attraction of savings groups
Ease of access, flexibility and convenience have made savings groups extremely popular in Africa. These informal groups make it easy to access small loans for urgent needs, as well as accumulate lump sums for larger expenses. An exploratory research study, Practices and Possibilities in Savings Groups, commissioned by our Foundation, has helped us to understand how members see the benefits and challenges of these groups, and how they view a more formalized connection to financial institutions.
At The MasterCard Foundation, we are investing over US$35 million to push the frontiers of the savings group approach and reach over 1.2 million clients. In partnership with Catholic Relief Services in Burkina Faso, Senegal, Uganda and Zambia, we are helping savings group programs to be sustainable with certified fee-for-service local trainers.
In Burundi, Côte d’Ivoire and Ethiopia, our partner CARE is trying to reach the most vulnerable and excluded populations—adolescent girls, chronically food insecure households and people living in post-conflict environments. In partnership with The SEEP Network, we have facilitated the development of program quality guidelines for agencies working on savings group programming, and we have championed the Linking for Change Savings Charter.
We believe that financial service providers must take a client-centred approach to develop products and services that help people to save by better addressing client needs. For instance, in Ghana and Uganda, the UNCDF MicroLead program is helping institutions focused on credit to transform themselves into deposit-taking institutions. In Burundi and Malawi, the Foundation is supporting commercial banks as they move to reach the bottom end of the market with appropriate products and services.
To date, the Foundation has supported 29 financial service providers across 16 countries to deploy alternative ways to deliver financial services, including agent banking, mobile phone banking and point-of-sale terminal devices to increase convenient, affordable access to savings accounts, thereby reaching 1.4 million savers so far.
This is just the beginning. To continue the momentum in the savings space, our new, ground-breaking initiative, “Savings at the Frontier”, will be launched during the Savings Groups 2015 conference in Lusaka.