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.