Not Just for a Rainy Day: Some Findings on the Role of Savings from the Financial Diaries in Malawi
This brief is based on the study Cash In, Cash Out: Financial Transactions and Access to Finance in Malawi which examined the financial behaviors of low-income Malawians using the financial diaries methodology. The study, conducted by Microfinance Opportunities (MFO), used the Financial Diaries methodology, tracking transactions of 172 households over an 18 month period. The brief focuses on the role of savings in the lives of low income households and the potential for banks to deliver savings products that meet their needs.
The study revealed that erratic cash flow is one of the biggest challenges facing low-income households. Findings include:
- Savings activity at banks overshadowed loan activity;
- Households routinely experienced weeks when they did not earn any income;
- Households mostly used informal finance to cope with these times;
- Households had a frequent need for large lump sums to pay for a good or service that regular earnings could not cover;
- Women fared better than men over time in terms of volatility of savings, though still at lower volumes than men.
The study concludes that savings accounts hold strong potential as a financial instrument for low-income households to cope with economically difficult times, by helping households ride out economic turbulence driven by external shocks and because savings are the primary means by which poor people meet the need to amass relatively large sums of cash.
