Savings are as Important as Credit: Deposit Services for the Poor

Savings play a strategic role for the poor, allowing the latter not only to reduce risk but also to increase their income. Sometimes savings can be even more important than credit. The poor rarely have access to voluntary deposit services, so they are obliged to make use of informal forms of savings.

This paper:

• Attempts to understand what pushes the poor to save and lists in order of preference the following reasons:
  • Security;
  • Low transaction costs;
  • Appropriate design;
  • Interest rates.
• Identifies what institutions can provide deposit services;
• Suggests what donors need to know about supporting savings services.

In conclusion, the following strategies for donor support are recommended:

• Avoid big credits lines;
• Fund capacity building;
• Fund research and development;
• Undertake information dissemination;
• Finance initial physical infrastructure and operating losses for a limited time for retail institutions;
• Fund institutional development for organizations;
• Avoid subsidized loans for funding portfolios.

Also available in Spanish, Russian, Arabic and Chinese here.