Tayo Akinyemi

Gates Foundation Supports Savings Accounts for the Poor

The Gates Foundation is at it again. Yesterday it announced $38 million dollars in funding to support programming that will give the poor safe, effective ways to house their savings.

Six grants will go to 18 MFIs that offer microcredit but will “make savings accounts available to an initial 11 million poor people across 12 countries in Africa, Asia, and Latin America over five years.” Potentially game-changing model? Check. Learn by doing? Check. Strategic geographic reach? Double-check. The grantees, which include ACCION, FINCA, the Grameen Foundation, ShoreBank, Women’s World Banking, and World Vision, represent leaders in the field of microfinance. Notably, the grant to Women’s World Banking is the largest it has ever received.

Clearly, this effort focuses attention on an element of access to finance that has been less emphasized. One of the arguments that Portfolios of the Poor makes is that the poor lack robust, flexible, and effective financial tools. Perhaps not surprisingly, this lack of resources spurs creative money management among poor households. Some utilize products in ways that defy their original design. For example, several borrow money through microcredit as a way to save it for future use.

Interestingly, savings are a key component of the Community Economic Development approach of Nuru International, a relatively new NGO that has applied design and systems thinking to the problems of the rural poor in Kenya. Granted, Nuru applies microcredit’s “group borrower” model to savings. But their approach definitely prioritizes savings as a tool for community-based economic sustainability. Perhaps this is just a footnote, but it will be interesting to note whether the Gates funding and the emerging emphasis on savings will result in an inflection point in microfinance.

Additionally, it might be worth observing whether m-banking and savings accounts dovetail at some point. After all, m-banking emerged from a need to circumvent the hefty fixed costs associated with “banking via brick and mortar branch.” Finally, given the diversity of grantee initiatives-from ShoreBank’s distribution innovation (staff members with handhelds and motorobikes) to Women World’s Banking focus on financial literacy via social soap opera-we’ll all want to know which methods prove most effective and why.