Safe and Accessible: Bringing Poor Savers into the Formal Financial System

This focus note summarizes the findings from country-level savings assessments in Benin, Bosnia, Mexico, the Philippines, and Uganda. It studies to what extent formal financial institutions satisfy poor savers' needs and identifies the root causes and reason for this. The findings suggest five strategies for improving poor people's access to savings services.

The note lists the following causes for the inability of formal financial institutions to compete with informal savings approaches:

• Inadequate management capacity and high cost structure;
• Few outlets for excess liquidity;
• Unfair competition from "cheap and easy" wholesale funds;
• Incomplete payment systems;
• Uneven regulation and supervision.

The author suggests some strategies for supporting small-balance saving mobilization:

• Document the market;
• Help clients make smart savings choices;
• Increase capacity in accessible institutions and lower costs in safe institutions;
• Align liquidity-related incentives;
• Establish balanced regulatory and supervisory frameworks.

The document concludes that:

• There is need for safe accessible saving mechanisms for poor people;
• Formal financial institutions cannot fulfill saving mechanism demand until they can offer services that are secure, affordable, and located where poor clients live and work.
• Funders, policy makers, and financial institutions themselves must work at all levels of the financial system to align incentives and create the capacity for formal institutions to tap the demand for savings services.