The Impact of Savings

This focus note considers the importance of savings by the poor, especially in the light of high cost debt they service. It addresses two broad questions:

• Why is measuring the impact of savings hard?
• What evidence do we have about the impact of savings and of specific products?

The study states that financial institutions, by designing and offering appropriate products, can stimulate savings. The potential gains to better ways to save are huge. Currently offered formal savings products can be made better in terms of price and quality. However, the focus of the microfinance industry has been on credit, rather than savings initiatives.

Given scarce resources, the sector is faced with having to choose among credit, savings, education, health and insurance as the most appropriate recipient of donor money. Impact evaluations can help determine the most effective place for donor funds. Given the focus on credit, clear impact evaluations of savings initiatives are yet to be seen. However, this is changing, as adaptation of new savings product ideas from developed countries hold promise of global improvement in quality and access of formal savings services.