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> Posted by Julia Arnold, Research Consultant
After two weeks of speaking with bank and microfinance institution staff, entrepreneurs, social investors, policymakers, and tech companies in India, my once clear understanding of how to build financial capability has now been completely scrambled. Building financial capability – that is, helping clients change (knowledge, skills, and ultimately behaviors) to make good financial choices – has taken on many layers of complexity and challenges in the context of, and in the face of, the realities of India’s poorest people.
But that is, of course, the fun of travel.
To briefly put India’s banking services in context – many villages in rural India still do not have a bank. According to the latest World Bank Findex data, half of rural Indians and nearly half of all Indians remain completely unbanked. Even if a bank exists in a village, social constraints often prohibit women from using it due to both limited mobility and lack of knowledge about and decision-making power over household finances. Basic access and usage of mobile phones remains limited. From my own earlier research with Cashpor Microcredit, I know that numeracy and literacy, as well as access, remain barriers for women to save with mobile technology.
> Posted by Julia Arnold, Research Fellow, New America Foundation
Many of the challenges to saving faced by the world’s poorest people were highlighted in the recent Washington Post article “Microsavings Programs Build Wealth, Pennies at a Time.” Among others, the article articulated two especially salient points around microsavings: 1) we know the poor save, and 2) savings can help poor people withstand shocks to their income (such as unexpected medical emergencies or job loss) without going further into debt and poverty. However, low-income people tend to rely on informal methods of savings, often putting their money at risk of being lost, stolen, or ruined by floods or rodents. Having a safe, reliable place to save is both beneficial to and desired by the world’s poorest people.
The Washington Post article included a link to a research study on savings I conducted while at the Grameen Foundation last July. I spent a month in hot, humid, and rainy Varanasi, India, on behalf of Grameen’s Microsavings Initiative, where I had the privilege to meet dozens of Cashpor Microcredit borrowers and savers. Cashpor Microcredit began offering microsavings in July 2011, using mobile phones to bring savings services to its poor, female clients. Curious about whether the mobile phone acted as a barrier to the savings services, I spoke with 65 women who either were current savers or wanted to become savers with Cashpor. My research revealed that Cashpor’s savers faced many challenges to saving, and one of these challenges was the mobile phone. Most women had limited or no access to a phone and many had limited numeracy and literacy. This, combined with low self-confidence, meant that they turned to others, often family members, including children, for help using the devices.
It’s not just low-income adults who can benefit from formal savings mechanisms. Youth can as well. Many youth around the world have access to small, erratic incomes, either as an allowance from their parents or from odd jobs — particularly if those youth are not in school. Low-income youth face many of the same challenges as adults face in terms of informal saving, but in seeking formal savings services, youth face unique regulatory barriers and knowledge deficits that keep them from being able to use formal services when they’re available. These problems are particularly pressing when considering the potential for impact. It is a given that learning to save early and having formal savings accounts help youth manage their income flows and transition into adulthood more easily.
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