A Penny Saved: How Do Savings Accounts Help the Poor?

This paper discusses challenges of measuring the impact of savings services on households. It also surveys available experimental evidence on the impact of savings on the poor.

Research shows that poor people save actively through formal and informal mechanisms. Challenges in establishing impact of savings services include those of establishing causality and existence of heterogeneous impacts. The paper states that:

• Poor households need savings to generate lump sums of cash, cope in bad times and fund daily expenses;
• Formal savings services provide privacy and reliability, and are less risky and costly;
• Savings accounts seem to benefit women more than men and have different impacts on different livelihood segments;
• Future research should attempt to understand aspects of formal accounts that deliver value to clients and the delivery mechanisms that maximize this value.

Studies on the impact of savings have been few, but rigorous. They confirm that having a safe place to save money is important to poor people, who are even willing to pay for savings services. Savings imply a reduction in consumption. The fact that large numbers of poor people save reveals the tough choices they have to make.