[PLENARY] Creating an environment for effective and inclusive savings

  • Weselina ANGELOW, WSBI
  • Stuart RUTHERFORD, Hrishipara Daily Diaries Project
  • Elisabeth RHYNE, CFI (former) 
  • Luis Treviño GARZA, Alliance for Financial Inclusion


Weselina ANGELOW opened the session by introducing the panel of experts, each representing a different perspective on savings. Elisabeth RHYNE, founder and former managing director of the Center for Financial Inclusion, represented the providers’ side of savings services. Luis Treviño GARZA, policy manager at the Alliance for Financial Inclusion represented the regulator’s perspective, while Stuart RUTHERFORD, author of ‘The Poor and their Money’ and ‘Portfolios of the Poor’ presented the perspective of MFI customers.

Angelow explained that the goal of this session would be to have a discussion on how to ensure a market environment that encourages savings. She opened the floor by asking all panellists to provide their definition of effective and inclusive savings. Rhyne reminded the audience that everyone understands savings differently. To financial institutions, savings represent a cheap source of funds in the case of large fund volumes sitting in a bank for a long time. For savings from lower-income customers, the marginal costs for a bank are often more than the value received. Therefore, it takes very dedicated financial institutions to offer inclusive and effective savings for this target group.

Rutherford explained that savings services of MFIs mainly consist of two services: the collection and storing of savings. He said that poor customers often face practical problems with collection, as they do not have access to automated systems. Commonly, poor people are involved in DIY savings, managing collections of savings in their own home or through local savings clubs. MFIs need to build trust with their clients to collect savings, to which he presented two success stories. Susu collectors in West Africa offer a pure collection service, visiting clients each day to collect savings that they return at the end of each month. The Grameen Bank in Bangladesh developed a good collection system to collect small repayments on loans and could easily transform this into a savings service.

Garza stated that statistics have shown large gaps on national and household levels between developed and developing countries in savings. He added that regulators are beginning to prioritise savings over credit, as savings are an important factor in bringing financial stability. To improve financial inclusion, regulators and policy makers increasingly focus on enabling savings. This improves resilience among vulnerable groups, as it allows clients to have different financial flows while also ensuring liquidity. For these groups, savings are the first source to face crises.


Angelow opened the discussion by asking Rutherford about his Hrishipara Daily Diaries Project in Bangladesh and how savings behaviour among customers changed since the first diaries were published 20 years ago. Rutherford explained that there were vast differences between those diaries and the current ones. Among poor people, there has always been a strong propensity to save, but that 20 years ago there was little institutional help for them to make their savings. Now, the diaries in Bangladesh show that most households have access to a savings collection service that is reliable, regular, flexible, frequent, and close at hand. The diaries show that even among the poorest group, people are becoming less keen on borrowing and more on saving money. Grameen has been key in this development as the first big MFI in Bangladesh to take savings seriously, soon followed by its competitors. Rutherford added that, in other countries, people may still be stuck with DIY savings.

Rhyne reminded us to always keep in mind the question whether it makes sense for customers to save at a financial institution, and if alternatives exist that are better able to keep the value of money. She noted that in Latin America customers were sceptical to store money in banks, in the light of past hyperinflation. Rhyne explained that policies are needed to incentivise financial institutions to offer these services. Given the high marginal costs of collection, she saw great promise in the digitisation of collection to drive down costs. Rutherford added that MFIs tend to lead clients unequally towards borrowing instead of saving. He implored MFIs to develop mechanisms to ensure that lending does not squeeze out savings, for example with hybrid products. 

Garza agreed with this analysis and stated that there is an increasing interest among regulators to promote savings and to identify mechanisms that lower the transaction costs associated to it. Digital savings can offer such a solution. Due to the COVID-19 pandemic, policies to implement digital savings have been fast tracked in many countries as an alternative to enable the operations related to this service. He warned that for low income groups, transition to such digital mechanisms requires trust. Customers need to learn how to use such tools and have confidence in using them. This would also promote financial inclusion. He added that partnerships are key in making finance work for the underserved and unbanked. Garza also recognised that regulators should play a key role here, in bringing together different stakeholders and lead the transformation in the ecosystem.

Angelow turned the discussion towards the COVID-19 pandemic, and how this impacted savings capacities of low-income clients. Rhyne explained that the financial sector expected that people would take out most of their savings to cope with the crisis during the COVID-19 pandemic. However, this did not occur. Rutherford clarified this development by reminding the audience that many MFIs were closed during lockdowns and could not release savings. The Hrishipara Daily Diaries Project in Bangladesh also revealed that clients were not heavily dependent on this service, and alternatively relied on cash savings at home and tightened their belts. Even among the very poor, the project found no reports that people faced hardships due to the unavailability of savings services during this period.

Angelow opened the floor for questions from the audience. Marine Lagarde asked whether MFIs could serve as intermediate collectors in the name of banks. Rhyne did not support this practice, although it is common around the world. She explained that, if an MFI collects savings but does not receive the benefits from storing these savings, it has no real interest in doing this. She noted that MFIs have worked for many years to become qualified to collect and store savings.

Micol Guarneri wondered whether strict regulations in monitoring bank account ownership and transactions such as KYC serve as an entry barrier for the poor. Garza answered that KYC indeed increments costs, but that digital services can take a more flexible approach to enable digital identities, thereby lowering costs. He added that the role of regulators is crucial in enabling a more flexible approach that can be adapted to digital platforms. There needs to be a balance between enabling more players while ensuring that all comply with requirements on security and data privacy. Although costs may be high at first, these could help pave the way to enable the ecosystem to move to financial services. Angelow concluded the discussion by adding that, during the crisis, regulators reacted in favour of less KYC and lifting fees, to improve access of low-income people to services. She urged the audience to consider how to continue easing access to savings, making it safe, effective, and inclusive for low-income clients.