From Ahmedabad to Tuzla, from Lagos to Bucaramanga, Women’s World Banking’s more than 35 years of experience researching the lives of low-income women worldwide can confirm that poor women are inherent savers. Despite having low or unpredictable incomes, they still manage to save 10 to 15 percent of their incomes. Women have what we call a savings mentality, the mindset required to put money away for a rainy day. Women are typically the money managers, financial planners and primary caretaker of children in the household, a role expected and accepted by women worldwide. These responsibilities make them more focused on the future than men and have an instinct for thrift… the two defining characteristics of a savings mentality.
And yet—women living on less than $2 a day are 28% less likely than men to have a bank account (World Bank). So where are they saving their money? Often in rather unsecure and unreliable ways such as neighborhood savings clubs, buying excess stock if they have a business or at home in a drawer or under the mattress… the latter a familiar tactic even in developed countries. All of these methods come with some risk or are unable to meet her savings goals. Savings clubs run the risk of being insufficient to meet her needs or break down before she receives her payout. Buying excess stock bets money on demand from customers that might not materialize or spoil before it is consumed. And of course, hiding money at home, apart from the threat of theft, or demand by family, stands as a constant temptation to the saver.
On the other hand, saving money in the bank could be a safe alternative, possibly pay interest and can be linked to other services. With such clear benefits, why aren’t women saving in a bank?
Irregular income, irregular savings
In research Women’s World Banking conducted in Colombia, low-income women were found to be employed in temporary or part-time work, or cobble together income from odd jobs. This income unpredictability was echoed by research in the Dominican Republic where two-thirds of poor women reporting that their income was irregular or mixed. Not knowing how much money you will have from day-to-day, much less week-to-week, makes it difficult for these women to make financial commitments like savings groups or commitment savings accounts. Even if a non-commitment savings account were available to them, the minimum balance and maintenance fee required by banks exacts enough of a burden for women to keep saving at home despite the risks.
Using a bank is inconvenient
Almost unanimously, the women who took part in our research thought that the amount money they saved was not worth the trouble of going to a bank. It may cost them more to take a bus to the bank than they are depositing. Thus, it makes absolutely no financial sense to make the trip. Women are also also notoriously time-poor. Time is money, especially to an entrepreneur: time spent away from her business to make a deposit is profits lost. This cost-benefit analysis is the primary reason low-income women keep saving in the informal mechanisms that they use: despite the risk, keeping money hidden at home is so much more convenient (and less costly) than the three mile walk or 30-minute bus ride to the bank.
Perception of banks as irrelevant
In countries with low rates of financial inclusion such as Pakistan, low-income women have little or no information about banks and mobility and cultural constraints render them inaccessible. Nevertheless, in countries where women are more familiar with banks, such asKenya, women’s perception is that money saved in a bank is “dead” and better invested in her small business; or in Colombia, women describe banks as “eating” money saved in the bank, gobbled up by high fees.
For many women, having a savings account is her first point of access to the formal economy. On the other side, for many financial institutions, her savings account is the institution’s first point of access to a largely untapped market that is positioned to be a huge opportunity for business growth. The benefits to both are incredible and beg the question – what is taking financial institutions so long to recognize that the 1 billion unbanked women around the world want a safe place to save? Banks that realize this are not only advancing financial inclusion for women, they are also opening up their services to a new market, thus ensuring the sustainability of their organization. So why aren’t they offering savings to low-income women?
The short answer is, it isn’t easy. Introducing savings is transformational and requires a shift in the culture of the organization. Sure, mobile banking has made a splash and has made financial services more accessible than before. However, if a financial institution is going to be successful in offering savings to women, the commitment and transformation must come first. That is not something that can come from technology, it must come from the leadership.
Given these structural, physical and emotional barriers to banking low-income women, what can financial institutions do to overcome these barriers and begin serving women? Once an institution has made the commitment, there are several essential elements that they must complete in order to serve women.
- Introduce a savings product based on research conducted on the needs of your specific market and designed to align with business objectives and capacities;
- Increase awareness through marketing and branding efforts;
- Develop institutional capacity to promote multiple products; and
- Develop new channels to reach women.
These elements are discussed in more detail, along with examples of how some of our network members have implemented them, in our publication “Savings: A Gateway to Financial Inclusion.”
It is a fact: low-income want to save, can save and need a safe place to save. While creating savings programs for the poor is not easy, we firmly believe, and results from our network members have shown, that serving women makes business sense. Neither women nor banks can afford to miss this opportunity.
Co-written by Gayle Gatchalian and Julie Slama