Designing Savings Services for the Poor

This paper discusses the points that microfinance institutions (MFIs) need to keep in mind while designing savings services for the poor. It argues that the needs of the saver should be carefully balanced with those of the institution.
 

The paper states that:

• Most poor people look for a system that provides the accessibility and security necessary to save;
• They need liquid savings to meet emergencies, as well as savings that are not liquid to buy capital assets;
• Well-designed, open access savings accounts and contractual savings agreement schemes might be useful to the poor.

The paper argues that an MFI designing savings services for the poor would like to minimize costs and derive profits. This can be done by:

• Carefully structuring pricing to encourage savers to maximize deposits and minimize withdrawals;
• Paying interest only on accounts with balances above a certain minimum;
• Charging fees for specific savings services;
• Reworking organizational costs and work methods;
• Offering savings services that seek up-market, higher value savers.

The paper offers the following pointers:

• Client- responsive financial services can serve the needs of poor people, while maintaining and improving the sustainability and profitability of MFIs;
• Designing appropriate savings services for the poor requires market research and careful, systematic product development.

The paper concludes with a discussion of the jijenge savings account that is being developed by the Equity Building Society.