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Savings for Low-income Earners

How can one get low-income earners to save some part of their income, knowing it's hardly enough for them to live on? What are the other salient benefits of saving? Can anyone put up a compelling argument to favour a culture of saving?

Tags: earning, finances, income, saving

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Permalink Reply by TCW Inc. on October 28, 2010 at 1:30pm

The Consultative Group to Assist the Poor (CGAP) has done studies in Benin, Bosnia, Mexico, the Philippines, and Uganda about this subject, in order to promote formal sector deposit services. For example, in the Philippines (where I am from), it was found that:

Despite widespread skepticism about whether the poor save, available evidence suggests capacity to save among low-income Filipinos... Most people primarily save for emergencies (precautionary motive). The second most important reason for people to save is the education of their children...These findings show that low income households in the Philippines need different types of deposit services to address different needs. Accessible, liquid products allow withdrawals at any time for emergencies, while contractual savings products enable them to accumulate money for specific expenses.

For more information about the methodology, you might want to start by checking out the assessment tool that the CGAP developed for researchers and policy makers: www.cgap.org/p/site/c/template.rc/1.9.5288/.

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Permalink Reply by Tom Murphy on October 28, 2010 at 7:06pm

I am going to put a summary of the findings of Dean Yang tomorrow that addresses this to a certain extent. In short, he found that Commitment accounts did lead to a change in savings rates. Great question. I hope to see more research on the topic.

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Permalink Reply by Tom Murphy on October 28, 2010 at 7:07pm

Cant wait to hear about Portfolios of the Poor. Morduch spoke a bit last week and I enjoyed his remarks. Looking forward to hearing more of what he has to say about his book.

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Permalink Reply by Olubunmi 'K Fawunmi on October 29, 2010 at 3:29am

Wow!
Thank you so much, Liza. I'm grateful for your prompt response and the measure of skill and professionalism you put into it.

I'll run through each of those articles and links you shared one after the other to learn more.

And, I'll look forward to reading all you'll share per your learning at the conference.

Now, I'm asking....how come I didn't discover SEEP until today? I look forward to sharing my findings too very soon.

Once again, thank you.

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Permalink Reply by Olubunmi 'K Fawunmi on October 29, 2010 at 5:54am

I will check out the assessment tool developed by CGAP as I hope to carry out a survey in Nigeria soon. I hope that the results of this survey will be a useful contribution to CGAP's efforts.

Thank you for your response and keep up the good work.

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Permalink Reply by Olubunmi 'K Fawunmi on October 29, 2010 at 5:54am

Hi Tom,
Thank you for your response.
I have found some compelling reasons for the seeming poor to save. I look forward to reading Dean Yang's summary, too.

Thank you, again.

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Permalink Reply by peter odion ebhota on October 29, 2010 at 8:28am

Hello 'Bunmi, I live in Nigeria and will be willing to do any work and share knowledge about micro enterpreneurs and reaching out to the poor.

you can check my profile.

Thank you.

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Permalink Reply by Olubunmi 'K Fawunmi on October 29, 2010 at 12:25pm

Hi Peter,
Thank you for your mail.

I'll be glad to learn from you. From your profile, your organisation is based in Ifo. I'm in Lagos. However, can we exchange contact information so we could connect either on Yahoo Messenger or Facebook? Here:

Facebook Name: Olubunmi 'K. Fawunmi
Yahoo ID: bunmifawunmi
E-mail address: bunmifawunmi@yahoo.com

I look forward to having a long chat with you.

Thanks again for your willingness to share.

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Permalink Reply by Tom Murphy on October 29, 2010 at 4:57pm

Olubumni - Here is the post I spoke of that discusses how commitment accounts can make a difference in savings.

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Permalink Reply by TCW Inc. on October 29, 2010 at 5:59pm

Olubunmi,

There's an update on the CGAP report series, published just yesterday, regarding branchless banking. If you haven't had a chance to review it, you may access this latest focus note here: www.cgap.org/p/site/c/template.rc/1.9.47614/. It covers among others vendors like M-PESA (Kenya and Tanzania) and WIZZIT in South Africa. Hope this helps.

Anna