Grameen Foundation's Microsavings Initiative
The poor lead very unpredictable financial lives. Their income arrives in irregular increments and they struggle to build assets, leaving them vulnerable to financial shock. Even if a poor person has access to microcredit, and is funding a small income-generating business through it, a single unplanned event – a healthcare emergency, natural disaster or other unexpected expense – can take away all the gains they’ve made. The poor need access to formal financial tools that allow them to manage risk, build assets and manage daily household cash inflows and outflows.
More one-third of the world’s population – 2.5 billion people – lack access to financial services, including a savings account. Without access to formal savings, poor people use informal and insecure saving methods, such as hiding cash or purchasing livestock. For poor households, especially those living on less than $2.50 per day, formal savings accounts are essential for creating stability and for moving out of poverty.
Grameen Foundation’s Microsavings Initiative, funded by the Bill & Melinda Gates Foundation, works in partnership with local financial institutions in the Philippines, India and Ethiopia to build savings products that meet the unique needs of the poor, delivering the products through innovative channels that are sustainable for the client and the institutions that serve them.
Our approach to providing the poor with access to savings concentrates on four areas:
We are client-centered – Grameen Foundation uses market research, ethnographic approaches and data analytics to understand different segments of the poor population, and define the needs and requirements of each segment.
We focus on product design – We innovate, design and scale financial tools to meet the needs of the poor, ensuring that these tools are more accessible, affordable, appropriate and transparent.
We innovate around delivery channels – To drive innovation around delivery models and channels to the poor, we leverage a unique model that combines the mobile phone and trusted intermediaries at the local level.
We help build enduring business models – We establish business models at the provider level, including integration of new products into business processes, change management, and measurement.
To understand the complexity of poor households, we use a combination of data analytics coupled with qualitative market research methods to design solutions that meet the client’s needs.
We know that poor people can save through formal methods, as long as the savings products are designed to meet their unique needs. Grameen Foundation is working with CARD Bank in the Philippines and Cashpor Micro Credit in India, using our Progress out of Poverty Index® (PPI) tool, to understand and segment customers and analyze product usage.
Data analytics can help us to understand differences in the savings behavior of customers in different poverty segments. One example of this involves a sample of more than 50% of one institution’s customers; those living below the $2.50/day poverty line were able to save only half the amount that customers above that line were able to save over the course of four to six years, which is when savings balances seemed to peak for all customers. Knowledge like this can help us understand the business volumes required to sustainably support a pro-poor savings program, or it can more tactically be used to design education campaigns targeted at the poorer segments and conduct research to figure out how to help those segments save more.
Focus on Product Design
Once we understand the unique requirements of poor clients, we follow a holistic approach to product development that involves translating market research, PPI and client-level data into the design of a savings product. This is followed by piloting the product, gathering customer feedback, then testing how adjustments to product features affect the business model. Lastly, we incorporate an effective marketing strategy to build customer awareness about the new product. We have learned that this process is essential for product uptake and ongoing usage.
For example, after designing and piloting a new product at one financial institution, we learned why there was low uptake in a new savings product. Customer feedback indicated that the opening balance for the account was too high, so the institution dropped the minimum balance and saw an immediate rise in the amount of savings customers living on less than $2.50 per day. We continue to work with this institution to explore ways to reach poorer savers.
Innovating in Delivery Channels
Reaching the poor in a cost-effective, client-friendly manner requires innovations in delivery channels. Our efforts center on identifying new models for delivering services to the world’s poorest people. For example, with more than 4 billion mobile phones in the developing world, we are helping our partners extend low-cost, sustainable mobile-based banking services to customers who were previously considered too expensive for financial services providers to serve. We are also testing new delivery models for engaging commercial banks through the business-correspondent model in India, and utilizing village stores as cashpoints in the Philippines.
Building Business Models
Our approach to expanding microsavings services to the poor requires a solid business case. We believe that a savings product can and should be affordable for the client, as well as sustainable for the institution. In our current projects, Grameen Foundation is working to test and prove valid business models for providing savings services to poor households. By developing flexible and comprehensive financial models, we can understand the impact that changes in product features, staffing models, product usage or delivery channels may have, and help the institutions make better business decisions.
- Women, Mobile Phones and Savings
- Information as Power: Implementing Data Analytics at CARD Bank - [ Español ] - [ Français ] PDF
- Change Leadership: A Microsavings Case Study PDF
- Savings and the MFI portfolio: Bridging the gap between the needs of the poor and the capability of the institution PDF
- Best Practices in Mobile Microfinance PDF
- Financial Services Overview PDF
- Savings in India via the Business Correspondent Model PDF
- Microsavings Overview PDF
- Mobile Financial Services FAQ PDF