Turning Interest into Savings

This case study describes the design, implementation and results of piloting a debt-to-savings product in India. The product combined a loan with a commitment savings device that targeted microfinance users who cover everyday expenses through borrowing. The design was tested in India with a loan that allowed borrowers to set up their own backyard poultry farming unit. The pilot was terminated prematurely due to institutional and operational challenges.Commitment devices facilitate self control by allowing the customer to set aside future money and prohibiting withdrawal from these funds for a set period. The pilot product allocated funds to savings through automatic deductions which were used as payments against the outstanding loan and as savings contributions. Conclusions include:

• Product design did not foster a sense of ownership;
• Using training sessions to market the product would have better prepared customers to care for the chickens;
• Complex pilots need to have a long timeline with greater involvement from experts;
• High risk of failure should be anticipated;
• It is important to have a clear approval process and coordination between parties;
• It is important to take into account the expertise of all that are involved in the product innovation.