October 08, 2010
Ishita Ghosh is Research Lead on Grameen Foundation's Financial Literacy Project.
Out in the field when we ask people what the biggest impediment to saving is, the common refrain is that they don't make enough money to save. It remains a popular perception that only the rich can afford to put money aside regularly and watch their wealth grow. Smaller-denomination currency is more often than not discarded as being of too small a value to ever add up to anything significant.
Out in Kyegegwa, about 100 kilometers from Fort Portal in Western Uganda, we met a man who proved us wrong. This man owned a small shop that dealt in food items, imperishable items and hardware, amongst other knick-knacks. When we approached him to open up a PostBank (a socially-concious bank reaching customers in rural areas) account, he jumped at the idea almost immediately. The accessibility that the mobile PostBank van offered him was invaluable, because he spent much time and effort to travel to his bank, which was at least 40 kilometers away.
When he brought us his savings to deposit, it was in a dirty, bulky cement sack that held a number of black polythene packets all neatly tied up. Within the packets were bundles of coins – loose change that his customers had handed over to him. In just over six months, the shopkeeper had managed to save 2.1 million Ugandan shillings (around $950) using this method.
When I went to interview this shopkeeper with the amazing story, I discovered that he had some very sound savings principles. He understood that even small amounts put aside regularly could accumulate over time into significant savings. This is the first tenet of good savings behavior – start putting away some money regularly, even if it is a very small amount. You will be surprised how it adds up over time.
The shopkeeper was also an organized saver. Every black polythene packet had a small piece of paper that mentioned the date and exact amount in that packet – a meticulous method of tracking his savings. But the most amazing part of the story was how the shopkeeper decided to save the notes or coins that came into his hands on a daily basis – to re-invest the larger value notes into his small business and expand it, while putting the coins away as savings.
The decision to save in coins also was a pragmatic one, linked to the shopkeeper's desire to protect his savings. The coins made the sack with his savings very heavy, an instant deterrent for thieves who would try to haul the sack away from his shop – something that a sack full of lighter notes could have never achieved. Moreover, the cumbersome sack would restrain the shopkeeper himself from taking the sack out of his shop and spending his savings, effectively curbing the ease of access to his money. This constitutes another important principle of good savings behavior – getting your money out of your reach, or creating a trivial barrier between you and your savings.
After hearing this amazing story, I immediately took the stray coins from the various pockets in my bag and put them away in my wallet. I smiled as I put the wallet away in my bag – I had gone to educate the people in these Ugandan village and towns about the importance of savings, but our local Ugandan millionaire had taught me something valuable instead!