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© Joe Cummings
Encouraging effective
& inclusive savings
Lessons and Best Practices from
the European Microfinance Award 2020
By Sam Mendelson
With support from Camille Dassy, Gabriela Erice, Micol Guarneri, Chiara Pescatori,
Daniel Rozas and Joana Silva Afonso
3
FOREWORD
This European Microfinance Award 2020 on
‘Encouraging Effective & Inclusive Savings’ has
generated an astonishing wealth of information and
insight. Despite the enormous challenges that financial
services providers are facing right now, a record
number of them from all over the world took part in
this year’s Award process. Why? Because in the face of
extreme pressures on households and business, saving
has never mattered more than it does today.
We at e-MFP are therefore extremely proud to present
this paper which not only captures why savings matter
so much to vulnerable populations, but also profiles
the ten Award semi-finalists and how their diverse and
fascinating initiatives actually encourage effective and
2020 has been a unique year. Within the financial inclusive savings – and the factors for their success.
inclusion sector, it has been challenging for all
stakeholders – MFIs, investors, regulators, TA providers I would like to thank Micol Guarneri and Chiara
and networks like e-MFP. But of course, our challenges Pescatori, the two consultants who so professionally
are nothing compared to those currently faced by assisted the e-MFP Award team over the evaluation
the millions of financially excluded clients the sector and selection processes. Thanks also must go to our
exists to help. With businesses shuttered, economies colleagues at InFiNe.lu, Luxembourg’s Directorate for
shuddering and a lethal virus showing no signs of Development Cooperation and Humanitarian Affairs
going away any time soon, their households and within the Ministry of Foreign and European Affairs,
businesses are under incredible pressures. and all the members of the Selection Committee and
the High Jury who gave their time and expertise to take
It was only a few months ago that the last European part in a rigorous evaluation process.
Microfinance Award publication came out. In Adapting
to a New Normal, we saw how climate change I would like to thank Sam and the rest of the e-MFP
poses critical threats to vulnerable clients’ lives and team involved in both the Award process and the
livelihoods, and the ways that different interventions writing, editing and production of this paper. And
from the financial inclusion sector to strengthen finally, we would all like to thank the 70 organisations
client resilience can mitigate these effects. Many of who took part in this Award, and especially to
the financial products that do so are credit-based. congratulate the ten semi-finalists and among them the
And credit plays an important role in making the three finalists profiled in these pages. We wish you all –
investments for resilience and adaptation possible. But and especially your clients – the very best in the weeks
planning for the future – to protect against shocks, and months ahead.
to accumulate usefully large sums, to build equity, to
smooth consumption and to make long-term plans – Christoph Pausch,
cannot (or at least should not) be reliant on borrowing. e-MFP Executive Secretary
It needs the encouragement of effective and inclusive
savings. Savings, to put it another way, are the firewall
against uncertainty.
5
TABLE OF CONTENTS
Foreword 3
“Neither a borrower nor a lender be…” 7
Why Saving Matters to Clients 7
A Brief History of Savings Models for the Poor 8
Women and Savings 10
How “Real” People Save 11
Why Savings Matter to Financial Services Providers 12
Why Savings Matter to Communities 12
The European Microfinance Award 2020 13
Objectives & Eligibility Criteria 13
Covid-19 and the EMA 2020 Award Process 14
Selection Process 14
Semi-finalists & finalists of the European Microfinance Award 2020 15
The Award Selection Process 16
Encouraging Effective & Inclusive Savings: Three Key Approaches 17
1 Designing Products for People & Purpose 18
Buusaa Gonofaa Microfinance 18
Muktinath Bikas Bank 20
Cooperativa de Ahorro y Crédito Fondesurco 21
Dormancy in Savings: The Challenge of Measuring Real Account Usage 22
2 Enabling Saving through Delivery Innovation 24
RENACA-Bénin 24
DSS Platform Ltd. 26
Mobilink Micro-Finance Ltd. 27
Ujjivan Small Finance Bank 28
Maintaining Savings Services during the Covid-19 Pandemic: Semi-finalists’ Responses 30
3 Encouraging Clients to Save 31
RENEW Microfinance Private Ltd. 31
Opportunity Bank Serbia 33
Fansoto 34
How Regulators can Encourage a Culture of Savings 37
Factors for Success 38
About the European Microfinance Award 40
2020 Selection Committee Members 42
Organisers of the European Microfinance Award 43
7
“NEITHER A BORROWER
NOR A LENDER BE…” William Shakespeare
Polonius’ cautionary line from one’s life into disarray, to more with millions of dormant accounts
Hamlet might be a surprising highly planned savings for high-cost among lower-income clients, with
section title for a paper on but predictable future expenses - most deposits drawn from higher-
microfinance – a sector long since weddings, pregnancy, a deposit for income individuals. While this
built on the sturdy and profitable a house, or retirement. provides MFIs with flexible, local-
foundations of credit. But Polonius’ currency funding that’s cheaper
For much of the past forty years,
advice to Laertes is a message that than foreign debt, it does not serve
the microfinance sector has focused
resonates today more than ever: the poor or the excluded. The
overwhelmingly on credit, which is
credit has its value of course, but provision of savings as a service to
easier to offer and more profitable
with risks and costs as well. Within this population is still consigned to
for the provider. More often than
the financial inclusion world, the a much smaller segment of markets
not, that results in credit being
time for saving as a real alternative and institutions, and remains a rarity
provided as the default financial
to just borrowing – saving to invest in the global financial inclusion
product when other options –
and to protect; to prepare and to ecosystem overall.
savings or insurance in particular
plan – has perhaps finally come.
– are both better suited to the
After all, entreaties to self-reliance
particular needs of the client – Why Saving Matters
and preparedness, like the Jamaican
proverb “Save money - and money
and come at both lower cost and to Clients
lower risk. And even though for
will save you”, are not new: they’re
microfinance institutions (MFIs), total There is a growing literature on the
in countless languages, advocating
deposits are comparable to loans benefits of effective and inclusive
prudence, planning and thrift when
outstanding, the reality is of a sector savings to clients, providers and
managing one’s finances. Saving,
so the message goes, can save
you. But this is about more than
just financial prudence. Benjamin
Franklin said as much: “By failing
to prepare, you are preparing to
fail.” It is probably one of life’s few
genuinely universal tenets.
It’s also intuitive. We all have a basic
understanding of what savings – or
the act of saving; saving as a verb
– are. You hold back some of what
you earn, sacrificing immediate
pleasures or opportunities for some
future benefit. This benefit can vary
from coping with the unknown and
unplanned shocks that can throw
8 European Microfinance Award 2020
A Brief History of Savings Models for the Poor
The long history they transformed into regulated entities with the
of savings makes necessary licenses to collect deposits. But in those
up a diverse cases, such savings more often than not focused on
landscape of gathering deposits from higher-income customers,
practices and while for their target poor and excluded clientele,
providers. savings products still remain sadly under-utilised.
Among the
Another model, with roots going back several
oldest are the
decades, is a range of client savings groups formed
mix of savings
by various local and international NGOs, often
and postal banks as well as savings and credit
modelled on informal groups such as Rotating
cooperatives scattered around many markets, most
Savings and Credit Associations (ROSCAs), which
of which trace their roots back to 19th Century
can reach even the poorest households living in
Europe and were replicated during the colonial era.1
remote rural areas. There have been considerable
In part due to that complicated history, this variety
efforts to link them with formal institutions, whether
of institutions comes with mixed levels of outreach
as a means to securely store the savings, access
and effectiveness, ranging from stodgy organisations
additional capital as credit, or gain access to other
serving mainly government needs, to those that
products, such as insurance.
actively serve rural and poor households, while
continuing to innovate and adapt. Finally, the newest form of savings is happening as
part of the rapid growth of digital financial services,
Among traditional MFIs, savings has had a complex leveraging the incredible uptake of mobile (and now
history. In countries like Indonesia and Bangladesh, smart-)phones to enable mobile savings programmes
savings were introduced either alongside credit or for more people at lower costs. And there are
soon after, and have evolved in parallel over the yet newer trends; cases where clients have taken
decades as an integral part of a broad financial technologies that were never intended primarily as
inclusion portfolio. There and elsewhere, compulsory savings vehicles – such as mobile wallets – to serve
savings were also often included as part of the an ancillary purpose as a place to keep their savings.
credit programme, but not as a stand-alone financial This is a fast-evolving market that will undoubtedly
service. However, for many MFIs in the world, continue to transform the savings landscape in the
more formalised savings came much later, when years to come.
society at large. Part of this is security of salaried income, affordable and suitable means
because of the enormous number of which comprise the majority of of absorbing periodically
benefits that savings bring to clients: the world’s poor – variations increased expenditures - and
in income and expenses have been shown to be an
• Consumption smoothing. can be one of the heaviest effective substitute for short-
For all households – but burdens of poverty. Easily term debt. Unfortunately,
especially those without the accessible savings are the most too often microcredit (and
1 For further reading on the history of savings, see Due Diligence: An Impertinent Inquiry into Microfinance. David Roodman, CGD, 2012 (Chapter
3: Credit History)
9
to take control of women’s
cash earnings that they bring
back to the household. In other
places, where women are the
primary money managers in
the household, money can
still be demanded by spouses
and relatives, preventing
women from investing in
important family needs and
from exercising financial
independence generally.
There is a wealth of research
demonstrating the depth of
impact that savings has on
women’s empowerment.
• Savings as equity creation.
increasingly, digital loans), fills savings, such as mobile wallets, A key aspect of both short-
this gap, potentially leading to can even help households and long-term savings is
a risky and costly practice of better share risks between its value in building equity.
cycling debt, borrowing from friends and family. Whether saving to buy land
one lender to repay another. or make a meaningful home
• Long term planning. Besides improvement, send a child to
short-term consumption school or vocational training,
• Protection from shocks. smoothing and unexpected or buy a long-term asset,
Typically, and too often, short- shocks, there are also large but these are all ways to increase
term emergency credit has foreseeable expenses. Many a household’s net worth and
been the default answer for of these are lifecycle events improve its financial well-being.
families who suffer a health- for which savings are perfectly
related or other financial shock suited and effective, including • Productive investment.
that leaves them vulnerable to tuition fees for children or Investing in a business, such as
destitution. The shortcomings young adults, weddings, upgrading equipment, hiring
of borrowing for emergencies childbirth, house purchase/ more staff, or buying inventory
are many – high interest rates, improvement, and eventually in bulk, incurs significant
delays in getting funds, and retirement. Whether saving cost to an entrepreneur, but
sometimes even the need to small amounts over long forgoing this because of
go to unscrupulous lenders. periods or setting aside sudden lack of capital can involve an
Insurance can play a key role in inflows (for example, harvest opportunity cost as well. Credit
mitigating shocks too, but the income) savings helps people is an important way to make
sunk costs of premiums (which accumulate usefully large sums this investment – especially
can never be recouped and to meet these long-term needs. when time is a limiting factor
have indeterminate benefits) is – but it is not the only option.
a ‘hard sell’ to cash-constrained • Gender empowerment. In Using savings for investment
households. But saving for the many cultures, women lack can be a cheaper, less risky
proverbial ‘rainy day’ doesn’t autonomy over their own and equally effective option
involve any of those negative finances, and it is common in – especially for smaller sized
consequences. More liquid some countries for husbands investments. And for larger
10 European Microfinance Award 2020
investments, savings can be financial sector can bring step towards building a
an important complement about significant opportunities. relationship that can unlock
to debt, reducing risk to the For example, purchasing that credit.
borrower and lender alike. land with a formal title may
require capital that only a • Safety and convenience. The
• Formalisation. For a low- larger financial institution most common way to save,
income household, the can provide. And for a client especially for small, short-
ability to move from a purely without formal credit history, term needs, is the proverbial
informal activity into the formal savings can be an important ‘cash in the mattress’. But that
Women and Savings
One of the employees had their own accounts – and more
major values control over their money.
of savings is its
many impacts Groups – collective finance – have always played
on women’s an outsized role for women. Self-Help Groups
empowerment, have been hugely effective in women’s economic
especially in empowerment (for savings as well as credit). The
many of the VSLA methodology provides another useful lens for
countries of the savings impact on women – it can be an important
Global South. In developing countries, there is a channel to increase household income and improve
significant gender gap in formal savings, with men food security, health status or children’s access to
being 6% more likely than women to save formally, education. However other research has shown that
according to the 2017 World Bank Findex. There women’s ability to fully participate in and benefit
is also a persistent lack of formal savings products from the VSLA methodology is hampered by gender
that meet the specific needs of women. The savings norms and inequitable power relations with their
gender gap is as much a problem of access as of husbands – further demonstrating the value of
suitability. savings that are designed with a clear understanding
of the full reality of the lives of the women clients
But to maximise the value of savings, access alone they’re meant to serve.
is not enough. Control over savings accounts and
how it’s exercised is a major factor. When women Women face specific challenges regarding the most
are able to manage their savings accounts with dominant shift in inclusive finance today – the rise
protected individual access, they increase their of digital financial services. They value privacy more
financial autonomy and decision-making. That leads than men – and have different priorities and needs.
to all kinds of household changes, for example Moreover, while DFS facilitates convenient and
increased purchases of productivity-enhancing accessible accounts, it also risks increasing existing
appliances that typically benefit women, such gender gaps – for example, women are 10% less
as washing machines, which enormously free likely to own a phone, so leveraging this technology
women from back-breaking and time-intensive provides comparatively more economic opportunities
domestic chores – one of the original cornerstones for men. And finally, empowerment through savings
of women’s liberation. In another example, before goes beyond household dynamics and gender gaps:
a factory made the switch from cash to digital mobile savings accounts have even been shown to
payments, women’s mothers-in-law sat outside the decrease the use of paid sex as a coping mechanism
gate on payday, waiting for their cut; afterwards, by vulnerable women in Kenya.11
comes with risks – theft, fire, different savings purposes (e.g., do exist – such as prize-linked
typhoon as a few examples one jar might be for an upcoming savings accounts, which avoid
– all of which can wipe out wedding gift, another for school telling people to save rather than
hard-earned savings overnight. fees, still another for daily needs). buy lottery tickets by instead
More commonly still, such Similarly, a typical ROSCA – a bringing the ‘thrill’ of a lottery into
cash is subject to “leakage,” group of friends or colleagues that savings – show just how effective
with the careful saver coming gather on a regular basis (such savings can be when they match
back to the stash to meet as a payday) and put in a fixed how real people actually think and
immediate needs, help out a contribution into a pile that each behave.
family member or a neighbour, member takes home on a rotating
More recent examples, designed
or to succumb to a temptation basis, repeating the cycle until each
through behavioural economics
purchase. Saving in a formal person has received the “payout”
research, show similarly promising
account, especially one that – is a way to save by creating an
outcomes. The Save More
requires some extra effort obligation to one’s peers. Another
Tomorrow2 programme involved
(even if small) to access, is particularly common practice is
prescriptive savings advice, and
a motivator - for all people, giving cash to a neighbour to
opt-out models involved switching
everywhere. safeguard – not because the
employees from defined-benefit
neighbour’s house is more secure,
to defined-contribution plans.
How “Real” People but because it gets cash out of the
The programme found that at
house, where it can’t be spent.
Save least some low-saving households
The complex ‘mental models’ welcome aid in making decisions
The benefits to clients are clear that show up in these informal about their savings. Commitment
and numerous. So what drives practices are starting to be better savings have emerged as an
the decisions about how to take understood and explained by the important means for providing
advantage of these benefits? And relatively young area of behavioural savings opportunities that both
what factors impede savings? economics, which stands in contrast fit people’s mental models and
Financial decisions are affected by to classical economic theory which also result in substantially higher
a multitude of variables: long-term always maintained that humans are levels of saving. Some aspects of
calculations, risk avoidance, gut rational economic actors. Instead, this, such as clearly denoting the
instinct, habits, social pressures, the biases and cognitive limitations purpose of the savings (such as for
misaligned incentives and which drive behaviour are “human health expenditures) can increase
misperceptions. Put together, they traits that systematically influence saving activity. Even simpler
create savings practices that aren’t individual decisions and market interventions, such as simple
well aligned with the traditional outcomes”, according to Nobel reminders to save, have likewise
economic view of people as rational Laureate Richard Thaler, and are proved effective in increasing
actors, nor are they well matched central to savings choices, among savings.
to traditional savings products like other things.
time deposits and current accounts. These are just some examples from
With few exceptions, the products a growing research field that reveals
Instead, people employ different offered by banks and other deposit- how better understanding people’s
‘mental models’ that help them taking institutions do not fit well mental models and behaviours
save better. Many can be seen in with the mental models underlying means they can be ‘nudged’
the informal sector. One common those of typical small-scale savers. towards positive behaviour -
practice is using different jars for However, the few exceptions that such as planning for the future,
2 https://www.jstor.org/stable/10.1086/38008512 European Microfinance Award 2020
events. Moreover, when those corruption and a more stable
deposits are further diversified financial and economic system
among different population overall. This is complemented
segments, that can further offset with growth in the private sector,
liquidity pressures due to seasonal when formalised savings becomes
or periodic collective cash needs. the norm. New providers enter an
(ideally) competitive marketplace,
Finally, savings mobilisation is often
in theory reducing costs, increasing
associated with an inexpensive
efficiencies, creating jobs and
source of funds for financial
expanding the private sector’s role
institutions. However, when it
managing risk and reducing the beyond just financial services.
comes to small savings, the matter
inappropriate use of credit. is more complex. For institutions Saving – especially for mitigation
collecting deposits from higher- of shocks, and health shocks in
Why Savings Matter income households, the funds can particular – can also improve health
to Financial Services indeed be cheaper than borrowing outcomes, enabling treatment in
from institutional and foreign communities where free-at-point-
Providers of-service health care is limited or
creditors, particularly due to the
The benefit of savings extends added benefit of local currency. non-existent. When individuals can
beyond those clients and their However, for those focused access health care, there is a knock-
households. There are significant on savings as a service to poor on effect on families, communities,
benefits to financial services households, the cost of delivering and society.
providers as well. Savings those services more or less offsets
The empowerment of women that
mobilisation can also offer an the benefits of lower capital cost.
comes from enabling their financial
opportunity for providers to autonomy likewise has benefits that
develop new relationships with Why Savings Matter radiate out beyond the individual,
clients. Providers that offer
to Communities as described in the box on page 10.
meaningful savings services to Outdated prejudices and practices
a broad client base can sustain The benefits of widespread access can be replaced by more equitable
growth and innovation for longer to effective and inclusive savings and progressive gender roles,
periods than those that do not, and the formalisation of savings and the unleashing of women’s
because of deposits’ higher stability, within an economy are not limited economic potential in the economy.
linkage of institutional growth to to the direct benefits to clients
clients’ preferences and economic and providers: there are significant Finally, savings – by definition
trends in the environment, benefits that accrue to communities – involves thinking about the
increased customer loyalty to the and societies as a whole. future, planning for goals and
institution, as well as increased contingencies ahead. A reduction in
First, a savings culture is part of impulsivity and risk-taking, replaced
opportunity to cross-sell products
the development of an ‘ownership by future planning, is positive at the
like credit to clients they already
society’, in which citizens can micro and macro levels alike. And
know well from their savings
acquire wealth, build assets, households that are able to save
history.
and have a personal stake in the for later in life place fewer burdens
Savings also offer financial stability. prosperity of the environment on the state, freeing funding for
For example, diversifying into around them. An ‘ownership’ projects - transport, education and
local currency deposits can reduce society can bring expectations of health infrastructure as examples -
dependence on foreign funding accountability of the state vis-a- that benefit society as a whole.
and reduce the risks stemming from vis the individual, particularly on
exogenous financial and political matters of regulation, transparency,13
THE EUROPEAN MICROFINANCE
AWARD 2020
sustainable for the institution,
highly transparent, and see
genuine client usage (rather than,
for example, programmes that
prioritise the opening of many new
accounts that end up dormant).
Finally, an effective savings
programme is based on - and drives
- strong trust relationships between
the client and provider.
3. Inclusive
Savings are inclusive when they
reach un(der)banked and excluded
segments - with a special focus
on women and youth. Successful
savings programmes should also
include a focus on the protection
Objectives & for institutions to show that their of those most vulnerable to shocks,
savings programme is built with a and do so within a comprehensive
Eligibility Criteria
holistic understanding of clients’ client protection framework,
The European Microfinance behaviour - to take advantage of recognising that taking poor clients’
Award 2020 (EMA2020) sought incentives, group coordination, and savings is a moral as well as a
to highlight organisations and teachable moments for awareness- financial responsibility - to not only
programmes that are innovating building to promote positive safeguard their money, but to do so
in the encouragement savings behaviour. affordably and with high levels of
and delivery of savings to transparency.
2. Effective
low-income and excluded Finally, the EMA2020 looked
populations. There are three Savings are effective when they where possible for evidence of
components in this Award topic are: well matched to clients’ programmes that promote a
that applicants had to demonstrate: specific goals and needs, are more amorphous concept - the
1. Encouraging affordable, accessible, secure, development of a culture of
easy to understand and wherever savings. This concept includes
Financial and non-financial possible take advantage of evidence of active usage, high
institutions can encourage savings technological innovations at the customer value, security and
by lowering barriers (making client and institution side to expand trust, a genuine focus on financial
savings accounts/groups easy to outreach, lower costs and improve education, and engagement (where
open or join). But access alone is service quality. These products relevant) with regulators and policy-
insufficient. Just as important is are affordable for the client and makers, all sufficiently widespread14 European Microfinance Award 2020
and with the institution having performance can be evaluated. Selection Process
played a role in the promotion of Finally, every applicant invited to
this savings culture. apply for Round 2 had to provide Round 1 of the European
written support from an e-MFP Microfinance Award 2020 on
Eligible applicants were ‘Encouraging Effective and Inclusive
member, e.g. a short message or a
organisations active in the financial Savings” received 70 applications
letter from the member addressed
inclusion sector that play an from 37 countries – easily a record
to the e-MFP Secretariat.
integral role in encouraging and/ – representing a diverse set of
or providing effective and inclusive provider types and with operations
savings within low income,
Covid-19 and the EMA in all regions of the world.
vulnerable and excluded groups.
This includes many different types 2020 Award Process Every single applicant invited to
of financial services providers proceed to the second round – 38
(FSPs) that provide savings directly Of course, the EMA process in out of 38 – completed this more
to clients, but also includes non- 2020 coincided with the Covid-19 comprehensive application form.
financial institutions that play pandemic, with economic This is also a record.
an integral role in the provision shutdowns and macroeconomic The EMA Preselection Committee
or mobilisation of savings (for downturns becoming widespread then evaluated all 38 against a
example, via partnerships or other soon after the launch of the Award. comprehensive set of criteria, and
relationships)3. Recognising the extraordinary 19 were forwarded to a Selection
pressures many applicants Committee of experts. The 19 pre-
Eligible institutions had to be based
would be under, but also the selected programs were based in
and operate in a Least Developed
particular relevance of savings 17 different countries, from
Country, Low Income Country,
in strengthening household and all the main geographic regions
Lower Middle Income Country or
business resilience during this of the world. Among them were
an Upper Middle Income Country
difficult time, the Award team 10 microfinance banks, 3 NBFIs,
as defined by the Development
decided to: 1) Extend the deadlines 2 cooperatives/credit unions,
Assistance Committee (DAC) for
for applications; 2) add a question 2 FinTechs and 2 NGOs.
ODA Recipients.
to the application forms on the
Relevant products and services impact of Covid-19 on their After two weeks of individual
had to be fully operational for at clients, staff and the institutions evaluation, the Selection
least one year. ‘Fully operational’ themselves; and 3) for the first Committee convened online in
did not require that relevant time, to ask for financial statements late September to choose the ten
products and/or services must be that cover the application period semi-finalists listed on page 15
offered in all branches or locations. itself, allowing the evaluators to (and among them, the three
Eligible institutions had to be determine the early effects of finalists) profiled in this paper.
able to provide audited financial the pandemic on the institution’s
statements so that financial resilience.
3 NGOs that facilitate formation of savings groups, developers of mobile apps whose products are deployed by financial institutions to facilitate
more effective savings, or other organizations that play a meaningful role in the provision or mobilization of savings15
APPLICANTS BY TYPE OF ORGANISATION APPLICANTS BY REGION
Network /
Association Technical services
Cooperative / 3% provider Europe and Central Asia Middle East North Africa
Credit Union 1% 3% 3%
4% East Asia Pacific
Other 6%
Microfinance
8%
Institution
29%
FinTech South Asia Sub-Saharan
13% 20% Africa
47%
NGO (non-financial
institution) Bank Latin America and
16% 26% the Caribbean
21%
SEMI-FINALISTS & FINALISTS OF THE EUROPEAN MICROFINANCE AWARD 2020
Institution Country Category
Buusaa Gonofaa Microfinance Ethiopia Finalist
Muktinath Bikas Bank Nepal Finalist
RENACA-Bénin Benin Finalist
Cooperativa Fondesurco Peru Semi-finalist
DSS Platform Ltd. Ghana Semi-finalist
Fansoto Senegal Semi-finalist
Mobilink Micro-Finance Ltd. Pakistan Semi-finalist
Opportunity Bank Serbia Serbia Semi-finalist
RENEW Microfinance Private Ltd. Bhutan Semi-finalist
Ujjivan Small Finance Bank India Semi-finalist16 European Microfinance Award 2020
THE AWARD SELECTION PROCESS
70 APPLICATIONS FROM 37 COUNTRIES
Round 1
(short application form)
Committee composed of the e-MFP and InFiNe.lu Secretariats and the Award consultants
38 APPLICATIONS FROM 26 COUNTRIES
Round 2
(more comprehensive application form)
Committee composed of the e-MFP and InFiNe.lu Secretariats and the Award consultants
19 PRESELECTED APPLICANTS
Selection Phase
Committee composed of e-MFP and InFiNe.lu members
10 SEMI-FINALISTS
3 FINALISTS
Final Phase
High Jury
WINNER17
ENCOURAGING EFFECTIVE
& INCLUSIVE SAVINGS:
THREE KEY APPROACHES
The 70 Award applicants – and Nevertheless, from the Award They are:
especially the ten semi-finalists evaluation and selection process
profiled in this paper – represent there have emerged three general
1 Designing Products
for People & Purpose
an extraordinarily diverse range approaches by which financial
of savings initiatives, provided by services providers can encourage 2 Enabling Saving through
different types of organisation, effective and inclusive savings, and Delivery Innovation
and in all regions of the world. The into which the semi-finalists can be
qualities that distinguish the semi-
3 Encouraging Clients
categorised.
to Save
finalists are varied and cannot ever
fit into a discrete category; they The following sections will examine
each do many different aspects of each of the three, and profile the
savings mobilisation well. Award semi-finalists that most
embody that approach.18 European Microfinance Award 2020
1
DESIGNING PRODUCTS
FOR PEOPLE & PURPOSE
“Recognising the need
is the primary condition
for design”
Charles Eames
From the early days of one-size-fits-all microcredit,
there has been a welcome trend towards products
that are demand-driven, matched to specific clients
segments’ needs, and better tailored to those products’
microentrepreneurs operators with active cash flows
specific purpose. This is increasingly true in savings as
who run businesses in densely populated market centres.
much as in credit, insurance or payments, and many of
the EMA2020 applicants – and among them, the semi- Dejaf Iqub has several interesting characteristics.
finalists and finalists profiled in this paper – exemplify First, it is delivered at the doorstep. Customer Service
this positive evolution, clearly developing products that Officers (CSOs) travel to the client’s shop to meet
respond to the specific life situations of target low- face-to-face and agree on the client’s saving frequency
income populations, and purposes for which they need and the collection amounts. Second, there is a real
to save. focus on saving discipline. Deposits are collected
at regular intervals (decided with the client), and
spending temptation is discouraged by asking the
client to travel to the branch for withdrawal. Third, this
Buusaa Gonofaa (BG), one of the Award finalists, is
model is promoted as a safer alternative to informal
an MFI that offers credit, savings and agriculture value
saving options. And fourth, Dejaf Iqub is designed to
chain financing in Ethiopia. Its main savings initiative
encourage commitment savings – clients commit to
presented for the Award is a high-touch model called
save towards a self-defined goal (such as festivities,
‘Dejaf Iqub’ (Dejaf = door-step; Iqub = local ROSCA),
children’s education, housing improvement, household
alongside passbooks and other savings products. Dejaf
asset acquisition, or business expansion).
Iqub was launched in 2016 after a lengthy ‘test and
learn’ exercise, with the aim of attracting large-scale There are several elements that underpins Dejaf Iqub’s
saving deposits by offering a safe, easy and appealing success. It is an easy and appealing way to save,
way of saving through regular doorstep collection of reducing the challenges of remembering to save, cost
goal-based small deposits. Dejaf Iqub targets informal and time of travel, and the opportunity cost of leaving19
one’s business closed in order to deposit funds. It also
involves regular face-to-face meetings between the
Buusaa Gonofaa
client and the CSO – a well-established motivator for
Microfinance continued savings, borrowed from established group
Ethiopia saving methodologies. Knowing you have a fixed
appointment to meet with others is a strong incentive to
maintain saving discipline. Further, the deposit amounts
are small and, most importantly, regular – reducing the
opportunity for temptation spending, and developing
routine, while transforming small amounts into useful
and secure lump sums. And finally, the programme
primarily targets informal microentrepreneurs,
with small daily cash flows in high-density market
Buusaa Gonofaa, an EMA2020 finalist, is an environments, which is well matched for regular small
NBFI in Ethiopia which was founded in 1999 deposits and making face-to-face service more efficient.
as an NGO. Although it had a deposit-taking
mandate, it only offered compulsory savings The Dejaf Iqub model is notable for being especially
until 2012, when it launched a new savings ‘high touch’ – requiring care and resources on the MFI’s
initiative. BG’s main target population is the part to translate into actual usage of the savings model
poor, with a particular focus on women, young that matches strongly with a specific client’s needs,
people who do not own land, and smallholder goals and context. So, new account opening requires
farmers. As of 2019 its 109,000 savings the CSO to visit prospective clients 3 to 5 times,
clients had EUR 7 million in deposits and were engaging them in conversations that lasts 5 to 10
supported by 452 staff. minutes with the objective of deep and accurate insight
into her existing money management practices. A CSO
Effective and inclusive savings is achieved will demonstrate to this new client how Dejaf Iqub has
through accessible and community-based deliv- real value compared with various informal options she
ery models such as collection at the door-step in is already using. The CSO will assist her in filling forms,
urban areas, and Rural Service Facilities (RSF) to engaging her to articulate her self-proclaimed savings
reach more remote rural areas and under-served goals (rather than being driven by the CSO), and then
segments: 57% of BG’s savers are female, 59% the CSO and client work together to determine a
live in rural areas, 16% are under 25 years old suitable weekly deposit amount and agree on a weekly
and only 8% are salaried employees. collection date and time.
BG’s primary savings initiative is “Dejaf Iqub” – a
A CSO will collect deposits from around 180 women,
doorstep ROSCA model which is both a delivery
any one of whom might typically be a petty market
channel and a product – but it is not BG’s
trader, aged 26, and who deposits an average of EUR
only savings product. Others include passbook
6, every Saturday at her open air vegetable stand,
voluntary savings, remunerated at 7% and with
intending to save for six months to pay her daughter’s
deposit and withdrawal done at BG branches;
school fees.
and RSF Savings – the RSF is a quasi-SACCO
type approach where BG constructs a small Beyond the Dejaf Iqub doorstep model, BG also offers
office with furniture and cash safe box, provides Rural Service Facility (RSF) Savings, a community based
training and community members are fully rural service to serve hard-to-reach areas and clients,
responsible for the daily operations of savings and where deposit and withdrawal are made at the
and credit; with intensive monitoring and RSF outlet and managed by the community with the
control by BG field staff. BG also offers loan-tied support of BG staff. It offers a typical bank-type tiny
compulsory savings within joint-liability solidarity balance deposit to farmers and rural villagers. All of
groups, from 5 to 15% of the loan amount.20 European Microfinance Award 2020
BG’s individual voluntary savings products (passbook
saving, planned, time deposit and loan-tied savings)
Muktinath Bikas Bank
can be delivered through this RFS methodology.
Nepal
Muktinath Bikas Bank Limited (Muktinath) is
another Award finalist which has adapted community-
based saving models and like Buusaa Gonofaa,
Muktinath offers a range of highly-targeted savings
products for its client base, but whereas Buusaa has
adapted modern processes and knowledge to the
old susu model, Muktinath has done the same for
solidarity-based group savings.
Muktinath is a private, national-level Development
Bank in Nepal which provides banking services through
a commercial banking and microfinance model.
Through its Small and Micro Banking Department, Muktinath Bikas Bank (Muktinath), an EMA2020
a dedicated team serves poor households and low- finalist, is a leading national-level Development
income women with a range of banking products Bank in Nepal, established 2007, and with
via an adapted solidarity group model, with doorstep almost 510,000 total savers (130,000 within the
services. microfinance unit of the bank), 127,026 of them
within 37,363 groups as of 2019, with EUR
Muktinath serves particularly under-served client
375m in total deposits, supported by over 1,200
segments, with more than 70% of its clients in rural
staff. To reach its targeted population, Muktinath
and remote areas where there is lack of infrastructure,
designed an adapted solidarity group savings
banking and insurance services. 68% of branches
model with doorstep services, encouraging
are located in rural and semi-urban areas. 60% of
positive savings activity via a combination of
clients are women, 14% are under 25, and only 2%
incentivising mandatory and interest-earning
are salaried employees. Most of its clients’ household
voluntary savings, including dedicated pension
sources of income are from agriculture, trading and
and insurance savings products, alongside
service businesses.
extensive financial education.
Low-income people are hesitant to go to conventional
Before this, Muktinath’s target client base
banking branches to access their services, and the
used to save in the form of acquiring assets
costs of accessing services for small amounts imposes
like purchasing cattle, gold, land, or lending to
significant opportunity costs on clients far from a
neighbours. These savings would seldom meet
branch. To address this, Muktinath designed a modified
both their immediate and long term needs like
solidarity group model to reach these target segments,
medical emergencies and lump-sum amounts
by providing doorstep services to its solidarity group
needed after 10-15 years. On the other hand,
clients. Clients are able to save and withdraw their
the clients had to compromise in distressed sales
savings at their doorstep during monthly group
of their assets at low prices. Additionally, the
meetings. If they need to withdraw savings on other
client had to face the risk of uninsured loss of
days, they can come to the branch office and meet
assets by fire and natural disasters. Muktinath’s
with the employee assigned to that client’s village and
range of mandatory and voluntary savings is
with whom they have an established relationship.
designed to help clients smooth consumption,
Various products are offered via both group and mitigate shocks, and accumulate usefully large
individual models. Solidarity group members commit to sums for long-term plans.21
minimum mandatory savings (of approximately EUR 0.75
per member per meeting) and Upakar Savings, where
Cooperativa de Ahorro
group members deposit tiny amounts of not less than
EUR 0.03 to meet common expenses for the group.
y Crédito Fondesurco
Peru
There are several voluntary savings products as well,
including: Personal Savings (with a EUR 0.75 minimum
balance and no limit on deposit and withdrawals);
Pension Savings (encouraging frequent deposits for
long-term saving, and if the client doesn’t withdraw
for 15 years she receives an additional 100% of the
deposited amount); Festival Savings (a commitment
savings to plan for celebrating certain festival
obligations); Term Savings (3 months or more); and
Insurance Savings, designed to increase access to life
insurance (there is a minimum opening balance of EUR
0.75 and then clients deposit any amount they wish
until they are able to purchase the desired insurance; if
a claim is made, the bank facilitates the process). In this
Cooperativa Fondesurco is a cooperative/
last product, Muktinath has partnered with several life
credit union in Peru, founded in 1994 with the
insurance companies to provide a competitive market
support of two local NGOs, CEDER and DESCO,
of insurance products.
and in 2015, it became a Savings and Credit
Finally, Muktinath also offers Atamnirbhar (Self-reliant) Cooperative specialised in rural microfinance.
Saving to gather savings from the remittances of As of 2019, it serves over 17,000 savers, with
migrant workers and channel savings into investment EUR 20.6m in deposits, supported by 192
(a collateral-free loan can also be linked to this savings staff. In line with its mission, Fondesurco works
product). It has long been known that the money in the poor, remote and underserved rural
remitted by migrants is used to supplement the areas of Peru, where the target population is
receiving family’s income and is therefore largely spent mainly farmers and local merchants. The saving
on consumption; only a small amount of remittances programme was first launched in 2015, with the
is invested in productive assets, much less saved. The support of several international stakeholders.
Atamnirbhar Saving account can be opened by the (Saving products were designed under the
migrant worker or his/her family member. Some portion programme called Alianza para el desarrollo de
of the remitted money has to be saved on a regular las finanzas rurales (AEFIR), financed by FOMIN
basis for the duration of the sender’s time abroad. and FMO, and managed by INCOFIN Investment
When the migrant worker returns to Nepal, Management.
s/he can withdraw money to start a business. Fondesurco offers four main savings products
Muktinath matches the deposited money as a of variable terms, currency and target market,
collateral-free loan. The rationale for this product is the plus an incentive plan for partner promoters
use of the funds for productive purposes and to provide who market and arrange the opening of
easy capital for business growth and self-employment. savings accounts. Many relatives and friends of
these promoters have savings accounts in the
institution.
A range of savings products clearly marketed to
particular client segments and their real needs also
characterises the savings initiative of Cooperativa
Fondesurco, a cooperative/credit union in Peru which22 European Microfinance Award 2020
Dormancy in Savings: The Challenge of Measuring Real Account Usage
A core measure of impact in financial services is least for successful programs). This is to be expected
outreach – how many individuals use the service? from accounts designed for frequent transactions, but
Closely related is the institution’s target segment – is with clients rarely keeping significant balances on such
the institution serving the poor? In savings, the two accounts.
figures are rarely easy to assess due to the key issue
So, to understand and evaluate the effectiveness of a
of dormant accounts - accounts that have little or no
savings initiative, it’s important to evaluate actual client
balance and are not used by the clients.
usage in the context of the organisation’s capacity and
Consider an institution claiming 100,000 accounts the intended purpose of the savings product. How
averaging $300 per account. At first glance, that looks successfully do different products fulfil their stated
like it’s doing great on outreach, serving clients who, goals and in doing so, encourage actually effective
if not poor, are certainly not wealthy. But if 80% of and inclusive savings?
these accounts are dormant (not an unusual figure),
the actual outreach is 20,000 accounts with an average A core problem facing the sector is that existing
balance of $1,500 per account - an entirely different reporting on savings provides no information to help
picture of both how many clients are served and who make such distinctions. Average savings balances
those clients are. And dormancy isn’t the only measure – when they are reported – are provided only as
of effectiveness; you have to also consider the level of aggregates, and transaction data is exceedingly rare.
transaction activity. Combining those two perspectives
Capturing data on account balances and activity was an
yields a richer and more valuable understanding of
important part of the EMA2020 selection process. To
savings usage.
do so, applicants were asked to provide both relevant
For example, fixed term savings tend to feature higher balance and transaction data, which was incorporated
average balances and few if any empty accounts. They into the process that led to the selection of the ten
also often comprise a large portion of the institution’s semi-finalists in this paper. In doing so, what’s emerged
total deposits. However, they have very low transaction is clarity both on what’s possible and also what’s
activity – as is expected from accounts that are by unrealistic. Many institutions don’t currently have the
design long-term savings. Commitment and similar technical capacity to run ad hoc reports on data that is
savings accounts are usually used by poorer clients and rarely used in that way.
so have modest balances, but few empty accounts
and high transaction activity, with deposits outpacing It’s time for a re-think of how the various stakeholders
withdrawals – again, as per design. (FSPs, regulators, funders and support providers, among
others) can work together to improve data collection
By contrast, current or other generic savings accounts
and reporting on how savings accounts are actually
typically feature high levels of dormancy, with many
used – and therefore the value they provide to clients.
empty accounts and low transaction activity. This is
The notional reasons savings benefit clients, providers
often the result of accounts being open for purposes
and communities are well established. Ensuring they
that are temporary (for example, to deposit loan
actually translate into those benefits requires a more
proceeds), and are then not used.
focused effort to establish industry-wide metrics, which
Finally, digital wallets and other mobile accounts can be incorporated into reporting platforms for all
often have very high numbers of low- or zero-balance types of institutions – and finally provide a clearer
accounts, yet they feature high transaction activity (at picture of how savings products are actually used.23
and the Ahorro Programado (Scheduled saving),
designed as a monthly saving plan to achieve a goal
determined by the member (for example, the purchase
of cows or land or pursuit of a business opportunity).
Both products allow clients to access a credit line
under favourable conditions, by using their savings as a
guarantee.
In addition, Ahorro Móvil (‘Mobile’ saving) allows clients
to make unlimited transactions, both in national and
foreign currency, to third parties by using Fondesurco’s
network of offices with no additional charges. And
predominantly services rural micro-entrepreneurs Ahorro Cuenta Niños (Savings Account for Children), is
– mostly farmers, breeders or traders. 80% of designed to help members save to build up a student
Fondesurco’s clients are rural, and the rest in semi-rural fund for their children’s future education.
areas, and 36% are very poor.
Fondesurco is a strong example of an institution that
Fondesurco currently offers four saving products. The in only a few years has designed its saving products
first two are: Ahorro a plazo Fijo (Fixed term saving), with both client profile and purpose clearly in mind,
available both in local and foreign currency and with recognising the importance of a de facto retirement
flexible terms, a product which is promoted as an product for its rural clients, their need for goal-based
alternative to a pension or other retirement plan due to savings, as well as engendering a savings culture
the difficulty of rural entrepreneurship activities in Peru among its clients’ children via the dedicated children’s
being eligible for the relevant social security benefits; saving product.24 European Microfinance Award 2020
2
ENABLING SAVING THROUGH
DELIVERY INNOVATION
“The value of an idea
lies in the using of it”
Thomas Edison
Savings have many components: they are products
(in the forms of accounts) and actions (in the form
of what savers do to save money and why), but also
the mechanisms by which the products lead to the
actions. These are the delivery channels, innovation in
which makes savings easier, more accessible and more
secure, and provides the framework for institutions operating costs while offering differential advantages
to encourage the activity of savings. Several of the compared with the competition. To respond to the
EMA2020 semi-finalists have demonstrated innovation inconvenience of traditional branch-based savings
in delivery of savings. models and to innovate in delivery, RENACA recruited
and trained female collectors who were provided with
motorcycles before being sent out in pairs.
RENACA-Bénin, an Award finalist, is a union of
cooperatives in Benin whose savings initiative focuses These Savings Promotion Agents (SPAs) offer this service
on ‘doorstep’ collection of a range of savings products, to clients at their homes or workplaces, allowing them
supported with promotion via savings and credit groups to save money without hassle. This proximity limits
(known locally as tontines), and facilitated by a mobile opportunity costs for clients, who no longer have to
application and tablets for security and convenience. make costly trips to counters with the attendant travel
The rationale for this stems from poor public hazards and the potential waste of time and loss of
confidence in traditional tontine collection models and clients.
inconvenience for clients, reducing access and uptake
The program has two main components: collecting
of savings.
community savings securely at the doorstep; and
RENACA’s programme, launched in 2018 via 11 promoting Self-Managed Savings and Credit Groups
‘counters’, or sub-branches, puts much more emphasis (SMSCGs). For doorstep products, clients must obtain
on responding to the requests of clients and to educate a passbook at a cost of EUR 0.46 and can choose
clients on the value of regular saving. To maintain their between a wide range of products of variable maturity,
loyalty, RENACA had to find the right model to contain amount and deposit frequency – such as Demand25
Deposit and Term Deposit. The SPAs each have a
RENACA coverage area to which they are assigned and are
monitored by a supervisor. A digital platform including
Benin a mobile application and use of tablets for the client
transactions are also used, which RENACA claims
has consistently improved security and speed of the
transactions.
RENACA claims that efficiencies in the delivery of these
savings services means that account maintenance
fees are much lower than those of competitors. The
proximity and convenience of doorstep savings reduces
the opportunity costs to clients of at least EUR 2.50 per
week compared to having to travel to a sub-branch,
and various measures – a cap on withdrawals, the
RENACA-Bénin (RENACA), an EMA2020 finalist, appointment of a programme manager, the creation
is a union of cooperatives in Benin, which of a team of SPA supervisors, the limit on cash in hand
operates through a network of 8 branches and and the requirement to work in a single shift – have all
25 sub-branches and is among the 12 largest boosted operational security. Finally, the gradual roll-out
SFD (Societé financiere decentralisée) in Benin. of portable Point of Sale (POS) terminals and tablets
Established in 2005, RENACA mainly targets for SPAs has helped to streamline operations to no
low income and vulnerable populations in more than 30 seconds per transaction and dramatically
rural areas and as of 2019, RENACA’s 247 staff increase reliability through automatic receipts and
support over 150,000 individual savings clients updating of management information systems.
and over 12,000 savings groups, with EUR
7.5m in deposits. RENACA’s savings initiative
focuses on doorstep collection of local savings RENACA’s model for updating doorstep savings involves
via a wide range of products (‘tontine’ doorstep providing its savings services directly to clients. By
models, term deposits and demand deposits), contrast, DSS Platform (DSS) is another institution
and promotion of savings through community that has taken a centuries-old savings model into
savings and credit groups, supported by a the 21st Century but does so via providing services to
mobile application and use of tablets for secure enterprises providing susu savings (susu means ‘plan’
and trustworthy client transactions. and involves informal daily doorstep savings) . DSS is
a FinTech company that evolved from a former susu
RENACA has introduced a doorstep model provider and which has established a digital platform to
based on recruiting and training highly systemise the operations of its network of client susu
mobile, female collectors - Savings Promotion enterprises and to improve the quality and safety of
Agents - who work in pairs, under oversight the enterprises’ savings delivery. DSS, in updating this
of a supervisor. The objectives of this and very old model with modern technologies, reduces the
RENACA’s other savings initiatives are to make risk to both client and collector, increases transparency
a sustainable contribution to increasing the and accessibility, while building on a well-established
autonomy of low-income social groups; to local savings practice. Storing of deposits at partner
reduce the cost of accessing financial resources banks further reduces the risk of deposits being lost or
for the network; and to raise awareness of the misappropriated.
importance of solidarity-based saving among
the various populations. 70% of RENACA’s The traditional susu model is fraught with challenges,
savers are female, 65% live in rural areas, 30% key amongst them being the misappropriation of cash
are under 25 years old and 2.5% of savers are by field agents who mobilise savings from customers
salaried employees.You can also read
