A Critical Review of Savings Services in Africa and Elsewhere

• by Graham Wright
• Jan 9, 1999
• 1 min
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This paper reviews what motivates poor people to save and how MFIs might assist, while still retaining the MFIs’ focus on profitable operations and on sustainability.

This paper reviews what motivates poor people to save and how MFIs might assist, while still retaining the MFIs’ focus on profitable operations and on sustainability. It briefly reviews the variety of systems and mechanisms that poor people use to save, and discusses the issues that the poor face. These issues are reviewed in the context of the trade-offs between access, liquidity/duration, risk/security, and returns on deposits made. There is also a brief review of traditional economists’ perspectives on savings and the demand for money. It also looks at the issues of compulsory, “locked-in” savings and the role they play in securing loans and capitalising MFIs. This paper analyses how different savings products are designed to meet the variety of reasons, why people save and the issues which MFIs face as they design savings products and services. It examines the marketing tools used by MFIs to promote their savings products and the challenges faced by MFIs as they design savings products and services. It also reviews the continuum of products from the highly liquid current account to what is possibly the most illiquid form of saving, life insurance and discusses the implications of the varying levels of liquidity for MFIs seeking to manage funds. The paper also attempts to bring together the key lessons and overlaps and offers conclusions and recommendations for MFIs seeking to design poor-responsive savings services.