When You Can't Save Up – Saving Down and Saving Through

This Note discusses how low-income households move financial value through time using loans and chit funds in order to access large sums of money. It uses Stuart Rutherford's framework of saving up (typical savings behaviour), saving down (taking a loan and repaying in small instalments) and saving through (insurance and group-based savings systems like chit funds or RoSCAs).

Low-income households often rely on savings down and savings through to move financial value through time. Poor households use informal sector variants of saving down and saving through, at greater risk and cost. This presents an opportunity for financial service providers, as there is large unmet demand and room for product innovation. Pattern of usage offers insights to develop savings products for poor households. Conclusions include:

• Current formal products for low-income households offer them the opportunity to save up;
• Few formal financial products offer low-income households opportunities to save down and through;
• Savings down and savings through are more common ways of saving in low-income communities;
• Microfinance loans help low-income households save down;
• Products that allow low-income households to save through and down are more likely to be popular and sustainable.