Savings as an Instrument for Poverty Reduction
This paper reports the findings of a two day conference on how to effectively support savings mobilization:
- Credit is very important to the poor but it does not reach the poorest;
- Savings is important as it reaches the poorest of the poor;
- In many developing countries, the poor hold a large part of the unbanked capital.
The paper lists the main places where the poor save at present as:
- Formal banking systems: These are concentrated in cities and reach only a very selective clientele. More than 90% of the population is excluded;
- The informal sector: This is the main recourse for the majority but resources remain limited, transaction cost high and operations risky.
The author gives examples of savings in microfinance institutions (MFIs):
- In West Africa, savings products are few and simple. The primary motive of savings is to have access to credit;
- In East Africa, MFIs are prohibited from offering savings services. They only offer a very restricted/inflexible savings service.
In conclusion, the paper recommends:
- A broader range of services should be offered to a wider range of clients including the poor and the very poor by the MFIs;
- Efforts should be made to improve the regulatory environment;
- New savings products should be developed;
- New alliances with the informal and formal sector should be created;
- Better understanding of savings practices amongst the poor should be developed.