Natural Savings: A New Microsavings Product for Inflationary Environments. How to Save Forests with Savings for and by the Poor?

This paper describes a new microfinance product called Natural Savings, a retail savings instrument fully backed by a natural growth process, and usable as a local medium of exchange.

Decentralized sustainable resource management in developing countries is important from poverty reduction and ecological viewpoints. There is, however, no financial instrument currently available that enables protection of small savings against monetary instabilities and inflation.

The paper proposes a solution, and provides an example involving sustainable forestry plantations in the Third World. It highlights the sustainability, scalability and replicability of this model. The proposed solution would:

• Provide an inflation-proof and robust savings instrument for the rural working poor in developing countries that are subject to high inflation;
• Aim to reduce the wealth gap between the rich and the poor without relying on tax redistribution mechanisms;
• Encourage sustainable resource management including reforestation and sustainable forestry in the developing world;
• Provide a systematic financial incentive directly at the grass-roots level, without governmental intervention.