[Fireside chat] 'Encouraging Effective and Inclusive Savings': Best Practices from the EMA 2020

  • Sam MENDELSON, European Microfinance Platform (e-MFP)
  • Manoj SHARMA, MicroSave Consulting
  • Chiara PESCATORI, EMA2020 consultant

Sam MENDELSON opened the session and explained that the panel would discuss the ten semi-finalists from the European Microfinance Award (EMA) 2020, to extract the innovations, lessons and success factors (read the e-MFP publication on the topic). Mendelson introduced both panellists and gave a background to the European Microfinance Award, whose theme in 2020 is Encouraging Effective & Inclusive Savings. With the COVID-19 pandemic, savings are more important now than ever before. The committee identified three general approaches to categorise the semi-finalists: (1) Designing Products for People & Purpose; (2) Enabling Saving through Delivery Innovation; and (3) Encouraging Clients to Save.

In the approach Designing Products for People & Purpose, Mendelson introduced Buusaa Gonofaa from Ethiopia. This 2020 EMA finalist offers credit, savings, and agriculture value chain financing. The MFI presented its initiative ‘Dejaf Iqub’ (a doorstep ROSCA model), where agents meet clients face-to-face and agree on savings frequency and amount thereby encouraging a savings discipline. Manoj SHARMA, an expert on savings from MSC, commended the MFI for their model and the flexibility it offers. He also praised Buusaa Gonofaa’s rigorous onboarding process to take on new clients, which has led to very low dormancy rates.

Mendelson next introduced Muktinath Bikas Bank Limited (Muktinath) from Nepal, another finalist in the 2020 EMA. Muktinath designed a modified solidarity group model to reach low-income people, which also includes extensive financial education. The bank provides doorstep services to its solidarity group clients, where clients can save and withdraw savings at monthly group meetings. Chiara PESCATORI, one of the consultants who supported e-MFP in the Award application and evaluation process, appreciated this approach. She explained that outreach is key to reach underserved clients and to help encourage savings.

Mendelson then presented Cooperativa Fondesurco from Peru that mainly targets rural micro entrepreneurs. He highlighted two of Fondesurco’s savings products: Fixed term saving, which is marketed as an alternative to a pension; and Savings Account for Children, a student fund. Sharma praised how Fondasurco offers a range of savings products clearly marketed to client segments. He commended the credit union for being able to offer a pension product, as these products are long-term and complex. The blessing from regulators is an endorsement of the credit union’s strong system.

Mendelson also introduced the first initiative in the group Enabling Saving through Delivery Innovation: RENACA-Bénin. This EMA finalist uses doorstep collection for a wide range of savings products, facilitated by a mobile application and tablet. The initiative promotes savings through community savings and credit groups, uses all female collectors, and has made a sustainable contribution to the autonomy of low-income social groups. Pescatori added that the word empowerment best describes this initiative. She appreciated how the initiative prioritises financial education of customers.

The second initiative in this group is from Mobilink Micro-Finance Ltd. in Pakistan, a microfinance bank with over 20 million saving clients. Mendelson explained their flagship product, JAZZCASH, that works as a traditional e-wallet. The e-wallet is simple to access and maintain and was designed for clients that have limited or no access to the banking infrastructure. It also offers several incentives to promote savings among clients, such as free GSM minutes and mobile data. Sharma added that it was great to see how digital technology can transform services and how Mobilink was able to execute this at a great scale. He appreciated that Mobilink focuses on savings, whereas most digital finance stopped at wallets and payments.

Mendelson next presented DSS Platform from Ghana, a FinTech company that has evolved from a former susu provider and established a digital platform that updates an old susu model to reduce risk to clients and collectors, increases transparency and accessibility, while building on a well-established local savings practice. Pescatori welcomed how the initiative built on a tradition and improved it to make clients safer, while adding a training program to train clients on the new technology.

The last initiative in this group is the Ujjivan Small Finance Bank in India. The bank has innovated the delivery of their savings products. It focuses on four areas: large-scale reskilling of microfinance staff towards banking services; doorstep services through technology deployment; multiple services linked to their saving programme and 24/7 ‘Digi-buddies’ who support clients in several languages on how to use digital channels. Sharma added that the bank had taken a huge leap from being a credit only institution for a long time, and that it had taken on a big risk to deliver a much needed and popular product. He also commended the financial literacy modules the bank offers.

In the final category, Encouraging Clients to Save, Mendelson introduced RENEW Private Microfinance Ltd. in Bhutan. This MFI encourages savings with a variety of simple, doorstep products. RENEW uses different approaches, from mandatory financial education to compulsory saving that can only be withdrawn with special approval. Less than 10 percent of its savers are also borrowers, and all borrowers need to take a mandatory financial literacy module. Pescatori appreciated the financial education, which is the core of the MFI. She added that it is rare to see an operation in Bhutan with such deep rural outreach that helps clients become financially independent.

The Opportunity Bank Serbia (OBS) found that a large share of the Serbian population does not have a savings habit. Among a wide range of savings products, Mendelson highlighted STASH, an innovative product to incentivise savings. Combining both savings and credit, it is initially an interest-free loan of 12 months, after which the loan is placed in a deposit account. After clients pay the monthly instalments, they can withdraw the full amount at an additional interest rate of 12.5 percent. Sharma commented that this is an interesting product that teaches clients to have financial discipline. He emphasised the need for such hybrid products. Although sustainability and replicability are difficult for this initiative, it is very useful as a financial education model.

Mendelson then introduced Fansoto from Senegal, an MFI that is located in an armed conflict region that serves very poor women. Their highlighted product is called ‘it’s possible’, an individual demand deposit account for beneficiaries in savings groups. Sharma pointed to the low minimum deposit of €0.70 and applauded the strong focus on financial education. All new clients of Fansoto receive six initial financial awareness modules, supplemented by an annual training plan and economic empowerment modules.

When asked about her overall impressions of the ten finalists, Pescatori mentioned that she saw it as glimpse of hope that so many institutions participated in this award during the COVID-19 pandemic. She appreciated how many initiatives were tailor-made to clients. Sharma was happy that more MFIs are focusing on savings, and saw opportunities in hybridisation and technology while warning that these must be inclusive to clients. Mendelson emphasised the importance of building trust among low income clients and commended the applicants for thinking about this. Pescatori echoed this by explaining that education and trust are key to prevent dormancy of savings accounts. All panellists applauded that many of the initiatives included elements of financial literacy to ensure that clients understand conditions of saving and are comfortable to use savings accounts.