Three Innovations in Micro-Savings

This guest post was written by Fehmeen, who blogs at Top Money Hacks.

Micro-savings are perhaps as important is microcredit, if not more, because they help create a financial buffer that reduces the economic volatility of the poor. Realizing the potential benefits of micro-savings, many microfinance institutions are showing interest in developing this service. A recent post published my Microfinance Gateway mentions a few innovations in rural saving services in Sub-Saharan Africa, three of which have been summarized below.

Linking large informal saving groups to formal financial services

It is natural for community-based saving groups to grow to a point where the financial needs (credit requirement) of members exceeds the amount saved. CARE (an international microfinance institution) works with such saving groups in villages and helps bridge the gap by linking these saving groups to formal financial service providers (commercial banks and the famous Kenyan mobile banking service, M-Pesa), where customized loan products are delivered to the poor against the saved funds.

(This is similar to the treatment of saving groups in the Trickle Up model.)

Formalizing traditional saving practices

Susu collectors are one of the oldest forms of savings and credit services in rural Africa. An officer visits community members at their houses to collect periodic micro-savings and advance microloans as well. Leveraging this established delivery channel, Barclays Bank in Ghana offers bank accounts for safe storage of these funds and extends microcredit through susu collectors as well.

Mobile savings services as part of mobile banking

M-Pesa is a prominent mobile payments service in Kenya, but regulations related to microfinance prevented M-Pesa from entering the micro-savings market (even though consumers found a loophole and retained funds in the M-Pesa platform). As a result, M-Pesa’s owner, Safaricom, partnered with Equity Bank to offer mobile savings to anyone with a mobile phone and a connection.

Read about these initiatives (and two others not mentioned above) at the Microfinance Gateway website.

Source: Microfinance Gateway Staff. (2010). Innovations in Savings Services in Rural Sub-Saharan Africa . Available: http://www.microfinancegateway.org/p/site/m/template.rc/1.26.14353/. Last accessed 2nd Nov 2010

About Fehmeen Khan

Hi, I'm a finance blogger who is interested in how different financial tools, including microfinance, can deliver real value to consumers.