Segmenting the Markets for Savings among the Poor Across Countries

This paper describes the savings patterns of different groups of poor people in Africa.

The study analyzes cross country macro-level FinScope datasets from seven African countries and a microlevel household panel called the financial diaries from South Africa. Results indicate that:

• Poor people use various formal and informal savings instruments to save;
• Many poor people save more than higher income neighbors within the same community;
• Strong take-up of a new category of basic bank accounts in South Africa demonstrates the desire for appropriate formal products among unbanked people;
• Dropout rate among adopters is high at 23%;
• Merely opening a savings account is not the same as using it regularly;
• Savings may be measured by intensity as well as duration;
• Potential size of the savings market needs to be measured in order to test a business case or justify subsidy.

The study categorizes portfolio of savings in financial instruments into four clusters by duration and formality and quantifies flows into each cluster. It recommends collection of baseline data and further research into adoption patterns of successful savings patterns in order to inform segmentation of the savings market.