During this session, the panellists discussed the role that their organisations play in savings programmes, their major lessons learned in serving low income savers and the challenges that FSPs can face in encouraging inclusive and effective savings. Micol GUARNERI opened the session by stressing the importance of savings services for poor people and invited the panellists to discuss the value of savings for clients and banks.
Sukhwinder ARORA told the audience how the savings sector developed over the past decades and why Savings at the Frontier (SatF) programme was set up. Already in the late nineties, people in the microfinance sector realised that the microfinance sector could provide more services than credit only. When Grameen Bank offered pension services, in a few years they could mobilise much more savings then all the credit outstanding. However, in the words of Arora: ‘It is too early to declare victory of the financial sector in savings’. While poor people love good quality savings services, the business case for providing small savings is not automatic. One of the aspects of savings that still requires a better understanding is, for example, why many poor people who have bank accounts and mobile wallets, still do 80 or 90 percent of their transactions outside the formal sector and what is the relation between the formal and informal sectors.
Weselina ANGELOW also looked back at the history of the savings sector, recalling the strong focus on massive outreach and on developing mechanisms that improve access for the poor. There are more than 1.733 billion accounts offered through the WSBI network. The network as part of its commitment to the World Bank’s Universal Financial Access Agenda (UFA 2020) between 2015 and 2018 generated 400 million new transaction accounts. In the meantime, the sector has realised that there is more work to do on the quality of savings. The Scale2Save programme of WSBI aims to support 12 FSPs in six African countries to build a better understanding of the value of financial services for poor people and the business case for low value savings. The programme drives development of customer-centric solutions that help clients to become resilient and improve their well-being. Scale2Save has to date reached out to 490,000 savers. It further conducts research that looks at customer needs, the quality and business models for inclusive savings.
Ilonka RUEHLE-STERN explained how the MFI RENEW worked out a business model for savings in Bhutan. They informed rural people that they could become eligible for a loan after six months of regularly saving small amounts of as little as € 1 per month. The low barriers to saving kept drop-out rates to a minimum. With this business model, simple financial products and thanks to the absence of competitor FIs in the remote region, RENEW has reached a customer base of 22,000 people and a portfolio of savings and loans worth € 2.5 million. The savings not only covered many of the loans, but also created the critical mass of clients for the MFI to become successful. Building financial literacy was another key success factor. The MFI staff organises centre meetings once per month to serve their clients, using those meetings to also inform them on the various aspects of finance.
Guarneri then asked the panellists to discuss some of the challenges that FIs are facing and how they can be supported to overcome these challenges. According to Arora, the core activity of support organisations in the savings sector is to find sustainable business cases. He used the example of geographical proximity to explain this. For many financial service providers, reaching out to rural people is a challenge, because branching out with many offices increases operational costs. SatF supports partner FSPs how to use satellite imagery and geo tagging with practical Excel-based tools, to visualise the geographical span of their agents. This helps them identify where they can improve uptake of their services and improve efficiency.
Angelow agreed that convenience of services and proximity are key to improve access. For inclusive business models, FSPs must develop customer-centric solutions that take the value added for customers as the point of departure. Save2Scale provides coaching to FSPs for change management to become customer-centric institutions where the customer is at the centre of attention along the entire value chain of the financial service offer. Coaching can help build an inclusive savings mentality, support the digital customer journey, or analyse how customer-centric a FSP already is. For lasting change, it is important that FSP staff own the change process. They must be empowered to make the change. There can be no sustained change if the FSP does not recognise the benefits of the change agenda. Angelow added that the FSP can be supported with data intelligence to be able to see the benefits of a more adaptive and integrated business model approach. The change should also be organisation-wide across the different functional teams and may include changes in organisational culture and customer engagement. In summary, the FSPs should become learning organisations.
Guarneri and Ruehle-Stern confirmed the importance of the management’s mindset and of the organisation’s culture to make the difficult transformation from a credit institution to a credit and savings institution. According to Ruehle-Stern, for support organisations to be effective, they do not necessarily need a strong partner at the outset, but rather a partner that is willing to adapt and learn.
Guarneri subsequently asked Ruehle-Stern to share some of the lessons learned from past experiences with encouraging inclusive savings. Ruehle-Stern argued that finding a balance between social and financial aspects is key to success. MFIs must at least cover their costs to be financially sustainable. At the same time, savings services require more patience from MFIs than credit services. Improving inclusiveness through savings requires building an understanding of the target group through focus group discussion and other types of market research. MFIs must also understand that inclusiveness and effectiveness complement each other. For example, RENEW MFI uses savings to refinance loans, thus being less dependent on external (expensive) refinance.
Guarneri then asked Arora how support organisations can help FSPs with the analysis of data, to which Arora responded that FPSs have to start by accepting that ‘approximately correct’ is better than to be precisely wrong. With that in mind, FSPs and support organisations should start collecting not just quantitative but also qualitative data and analysing data jointly. They can analyse the performance of branches and products, and create dashboards of particular relevance to the FSPs. The usefulness of qualitative data collected through phone calls should not be overlooked. Arora argued that many FSPs spend a lot of resources on marketing. They should also spend resources on the collection of data to learn from customers’ behaviour and feedback to improve their performance. If customers really like the product, they will do the marketing.
Angelow added that Scale2Save can provide operational toolkits for FSPs to support them with the translation of research findings to solutions. He also mentioned that customer engagement in the savings sector is sometimes very low, and that formal savings are not yet fully effective and inclusive. Scale2Save’s definition of an active and engaged customer is a customer that makes at least one transaction per month. The programme bundles financial products to trigger more engagement. At the same time, the programme aims to keep the number of different savings products limited to prevent confusion among customers.
Finally, Angelow argued that micro savings customers may value safety and accessibility more than low prices. This could imply a need for building more trust in customer relationships, digital solutions for other aspects of the business model and convenience partnerships with other organisations.
For more information on best practices in effective and inclusive savings, check out e-MFP's new publication on this topic.