Microfinance

At Clinton Confirmation Hearing, a Glimmering of Possibility for Asset Building in Foreign Assistance

Leila Seradj — Wed, 14 Jan 2009 18:04:00 -0500

As all of Washington-- and indeed, the United States, if not the world-- awaits with anticipation President-elect Barack Obama's inauguration next week, a glimmering of possibility regarding a more prominent role for asset-building strategies was evident in Secretary of State Hillary Clinton's confirmation hearing yesterday. Giving a nod to toward social development, microfinance, and bottom-up empowerment as key elements of a foreign policy strategy, we can't help but suggest how an asset-building framework would enhance the impact of such strategies.

When discussing her foreign policy goals, Clinton noted that world leaders, enmeshed in "the cross currents of the most severe global economic contraction since the Great Depression," have much to learn from that crisis regarding "the consequences of diplomatic failures and uncoordinated reactions." But she continued:

"Yet history alone is an insufficient guide; the world has changed too much. We have already seen that this crisis extends beyond the housing and banking sectors, and our solutions will have to be as wide in scope as the causes themselves, taking into account the complexities of the global economy, the geopolitics involved, and the likelihood of continued political and economic repercussions from the damage already done."

Where to begin? Clinton's call to the importance of a "bottom-up" approach to development, "to ensure that America remains a positive force in the world" resonates with the Global Assets Project's work on providing opportunities for savings and wealth accumulation for the poor from the grassroots. (See, for example, my colleague Jamie Zimmerman's Reform Foreign Assistance proposal, which made the final cut for the Better World Campaign's One Day One "9 for ‘09" contest.) She continued

"The President-elect and I believe in this strongly. Investing in our common humanity through social development is not marginal to our foreign policy but integral to accomplishing our goals."

In what ways could this bottom-up approach manifest itself, as a part of the U.S. top foreign policy priorities? As Clinton highlighted in her remarks, microfinance and social development are proving to play an increasingly key-and notably promising- role in poverty alleviation efforts. Linking this with President-elect Obama's upbringing, and his foreign policy priorities, Clinton poignantly remarked:

"...I want to mention that President-elect Obama's mother, Ann Dunham, was a pioneer in microfinance in Indonesia. In my own work on microfinance around the world... I've seen firsthand how small loans given to poor women to start small businesses can raise standards of living and transform local economies."

Noting that Dunham's illness had prevented her from attending a microfinance forum at the Beijing women's conference in 1995, in which Clinton had participated, passing away shortly thereafter, she observed:

"...I think it's fair to say that her work in international development, the care and concern she showed for women and for poor people around the world, mattered greatly to her son, and certainly has informed his views and his vision. We will be honored to carry on Ann Dunham's work in the months and years ahead."

What might this look like? If we had any say, it would include a foreign assistance framework that exemplifies a commitment toward incorporating asset-building policies and initiatives. Be this in the form of child development accounts for education and health purposes, conditional cash transfer programs, or opportunities for microenterprise development, the time is ripe for a U.S. foreign assistance strategy that takes into consideration the crucial nature of accumulating assets in enhancing the well-being of the poor. Should President-elect Obama, through the work of his Secretary of State, embrace asset-building strategies as a part of his foreign assistance framework, his already historic election could prove to be path-breaking in more ways than one.

Last Day to Vote: Building Assets into a 21st Century Foreign Assistance Framework

Jamie Zimmerman — Mon, 12 Jan 2009 19:48:00 -0500

Its last day of the Better World Campaign's On Day One project and there is still time to vote for the idea you think President-Elect Barak Obama should prioritize on the first day of the next administration for improving the United State's image in the world. When blogger Mark Goldberg of the UN Foundation came to New America in the spring of 2008 soliciting ideas for policy proposals, I thought it was little more than a fun experiment in the use of new media to express opinions. I had no idea the Campaign would face the ideas off against each other in November, narrowing 81 selected ideas down to 9 for '09 (9 big ideas for the incoming president to consider upon taking office). Or that my idea to reform foreign assistance (to focus the allocation of funds more squarely on the social and economic empowerment of poor people) would win the Global Poverty category. Or that there would be a Round 2 to the contest in which the 9 for '09 would face off yet again.

I don't expect to win the contest -- my idea is up against some even more lofty and innovative competitors. On the other hand, that this idea - that funds should be more smartly allocated to providing opportunities for asset building and wealth creating empowerment for the poor, rather than wasted and corrupted on ineffectual top-down projects - has resonated with voters in this first place (and making a fair showing at that), should be utterly encouraging for those of us working to elevate asset-building microfinance and social policies around the globe.

Even in a world of economic uncertainty, there is a still a belief that given the right tools, the poor and traditionally disenfranchised can stake their own claim it the dream of a better future. The microcredit movement has helped shape this confidence in the power of individuals to lift themselves out of poverty. Yet, the tools people need to take ownership of their lives extend well beyond microcredit, including (but certainly not limited to) an identity that will allow them access to the formal economy; property rights so that they can take ownership in their land, home, or business; access to an array of financial services such as savings accounts allow them to save for future investments in education, a business or old age and insurance to further protect them from the vulnerability of any number of shocks, and; access to policies and programs that facilitate this process, such as child development accounts, conditional cash transfers, or other microfinance-plus initiatives.

Reforming the foreign assistance framework to redirect resources toward bottom-up programs is a fairly specific policy idea, yet it finds itself competing with much grander goals. In this final day of the contest, I thank voters for their encouraging show of interest in telling President Obama to break the wasteful status quo in development assistance spending and, instead, concentrate on something with potentially a much greater return on investment - the empowerment of people.

Climate Change and Microfinance: It's Not Easy Being Green?

Leila Seradj — Mon, 17 Nov 2008 15:02:00 -0500

The unofficial color of the new millenium is beginning to evoke less images of Kermit the Frog, and more impressions of the lively discourse on environmental sustainability.

What with "green" on everyone's tongues, it was only a matter of time before the question of environmentally-friendly practices arose in the microfinance realm. Green Microfinance, an organization devoted to harnessing the power of renewable energy to microfinance, is facilitating this week's microLINKS Speaker's Corner on Microfinance and Climate Change, which poses three questions to its participants:

What is the impact of microenterprise and microfinance clients on the natural environment?
How can MFIs promote environmental sustainability while still meeting their "core mission" of reducing poverty?
What is the role of donors and investors in ensuring environmental sustainability of an MFI and their clients?

These issues are important, but one can't help but wonder if there's a fourth question that also needs to be asked: What can microfinance do to help protect livelihoods threatened by climate change?

In 2001, the U.N.'s Intergovernmental Panel on Climate Change surmised that "the impacts of climate change will fall disproportionately upon developing countries and the poor persons within all countries."

And last year, IPCC Chairman R.K. Pachauri re-emphasized this forecast in his Nobel Lecture:

"...the impacts of climate change on some of the poorest and the most vulnerable communities in the world could prove extremely unsettling. And, given the inadequacy of capacity, economic strength, and institutional capabilities characterizing some of these communities, they would remain extremely vulnerable to the impacts of climate change and may, therefore, actually see a decline in their economic condition, with a loss of livelihoods and opportunities to maintain even subsistence levels of existence."

Unfortunately, it seems that as the destructive effects of climate change begin to manifest themselves, spending shifts from long-term sustainable development programs to emergency relief. In Tanzania, where drought has had grave effects on the energy sector, health, and food prices, Richard Muyungi, the deputy-director for the environment in the office of the Tanzanian vice-president, attests that this is already evident.

It's clear, then, that the devastating impact of climate change on the livelihoods of many in the developing world is something that needs to be taken into consideration if we're to be vigilant about decreasing dependency on foreign assistance. Climate change has already had an impact upon land, the value of property in the developing world, and on low-income individuals' ability to cultivate resources and leverage their assets. When assistance is shifted from providing long-term access to sustainable financial services to communities, and toward emergency relief, this only intensifies the problem.

So while efforts to "green" microenterprises in developing countries are both crucial and commendable, the need to provide safeguards for livelihoods of those most vulnerable to the effects of climate change is likewise imperative.

In a speech made earlier this year, IMF Deputy Managing Director Takatoshi Kato insisted that countries' efforts to adapt to climate change must fit with their broader development agenda, maintaining that social and economic development "is one of the most powerful ways to increase the capacity to adapt to climate change":

"Rising income levels can create the fiscal space needed to meet additional demands on public spending, both on climate-related public goods... and to protect programs affected by climate change."

He continued:

"There may be opportunities for spending that is ‘pro-development' and that helps adapt to climate change at the same time.... Nonetheless, it is important to guard against the possibility that efforts to adapt to climate change would detract from wider developmental objectives."

If development and climate change are, as Britain's international development secretary stated in February, "inextricably linked," how can development programs and assistance be focused so as to help sustain livelihoods? What role can microfinance play in order to protect the assets of low-income individuals who are particularly vulnerable to the effects of climate change? Some food for thought as we enter tomorrow's Speaker's Corner on Microfinance and Climate Change.

CGI Closes: Amidst Glitz and Pomp, Substance

Jamie Zimmerman — Fri, 26 Sep 2008 18:32:00 -0400

The Clinton Global Initiative is coming to a close and as I sit here listening to Gordon Brown talk about the importance of the global economy and the gap between the rich and poor, I find myself also thinking about the images of Drew Barrymore, Matt Damon, Muhammad Yunus, Bono, Bill Gates, Wylclef Jean and Bill Clinton on my camera, and last nights performances of James Taylor and Yousoo Ndour's. Waking up from my day dream, I realize that this conference could have easily succumbed to three days of a star-studded, papparazzi-riddled social affair. And perhaps in some ways it is.

But as I go through the notes I've taken over the last three days, I am quite pleasantly surprised by the amount of substance and the breadth of issues and innovations covered over the last three days. Indeed, I'm so impressed that I find myself at the end of this conference in 30 minutes unwilling to end my blogging on its sessions and commitments. Over the next week, I plan to continue providing commentary on CGI sessions, issue areas and commitments. Here is a sampling of topics I plan to cover:

Asset Building Beyond Microfinance? The Forgotten Bottom and the Missing Middle
Rural Finance: a New Frontier for Global Asset Building?
Technology, Information and the New Age of Access
Energy, Climate Change and Sustainable Development: An Opportunity for Microfinance?
Food Prices Shifting Microfinance Focus?
CGI Commitments: My Top 10 List

Send questions, comments, and stay tuned!

CGI's Call for Integrated Solutions I: How About a Broader Perspective on Poverty?

Jamie Zimmerman — Thu, 25 Sep 2008 17:34:00 -0400

All day yesterday, I capitalized on the opportunity to unabashedly promote the asset building framework by putting a spotlight on its prominence in poverty alleviation discussions and commitments here at CGI. And I actually barely skimmed the surface of some of the specific asset-focused activities coming out of these sessions (Habitat, others). As much as I relished it, I also want to acknowledge that asset building and financial services for the poor are one piece of poverty alleviation in a complex global environment. The specific commitments are great, but what about the larger perspective?

Yesterday's afternoon CGI held a plenary on profits, jobs and equitable growth. The stifling of poverty alleviation around the world is not simply due to lack of access to effective financial services, but also to lack of access to property, to opportunity, to education and to healthcare. Exclusion from any combination of these often results market inefficiencies, slack productivity, an inability for an individual to live to their full human potential. Hernando de Soto called for property rights and legal empowerment of the poor to give them the tools they need to achieve their version of the American Dream.

Still wearing me asset-building hat, I applauded when members were reminded of the threat and persistence of poverty traps, but were instead described as inequality traps. But the panel didn't go far enough: the term "inequality" was largely used in the context of income. In fact, President Clinton remarked that income inequality has increased every year in the United States since 1973. This seems a dramatic statement, but imagine how much more impact it would have had if he had instead stated the rise of wealth inequality, much starker (by some estimates 50 times more) than income inequality.

If we are going to develop any successful, integrated solutions to poverty alleviation (the subject of this morning's plenary too, and more to come on that), then the very least we could do is stop describing poverty so very narrowly as a lack of income. Instead, why not describe it as a lack of assets (financial, human, social) that the enterprising poor can leverage in any number of ways to improve their lives?

Savings and Asset Building at CGI Part II: Working Group Session II – Financial Services for the Poor

Jamie Zimmerman — Wed, 24 Sep 2008 20:09:00 -0400

There is still much to learn about the financial tools needed to help the world's poor mitigate risks and build assets in order to build an economic base and contribute to long-term economic development. This session primarily focused on "building assets in the developing world."

Sylvia Matthews , director of Global Development at the Bill and Melinda Gates Foundation opened the second working group session stating that 2.3 billion with no access to financial services for the poor, even though evidence suggests they would make perfect customers. She asked her panelists: "What do people need, what works, what are some solutions and how do we reach scale?" Again, asset building and asset protection products reigned supreme:

Bob Rubin, the first Director of National Economic Council, then Secretary of the Treasury, and now a Director at Citigroup, Inc remarked on the health of the financial system and impact on financial services for the poor. "We need to stem the crisis of confidence in the US now, but we also need to put into place effective responses to longer-term problems the country faces, like healthcare, education and economic opportunities for the poor."

Fazle Abed, the Founder and Chairman of BRAC, spoke about BRAC's ability to reach the poor at scale. Abed described a simple model of success for BRAC, which now reaches millions of clients and has collected 200 million in savings deposits of the poor: "We started small, then tried to make it effective, then efficient, then expanded." Savings coupled with lending is a critical part of their model, which he says "happens like clock-work." It gives clients discipline and regularity, and loans repaid weekly in small sums. In his view, the biggest challenge faced to provide financial services in most countries, is that MFIs cannot mobilize savings -- a huge regulatory hurdle to reaching the poor with savings and other financial services. When financial institutions can't take savings, they lose out on that access to capital and have to borrow equity from capital markets, stifling the growth of some institutions. Abed called for a structure permits these organizations to take deposits so that they can expand programs in un-reached areas quickly.

James Mwangi, CEO of Equity Bank, Africa's largest microfinance institution and now large regulated bank, described the sweeping success of the bank's pro-poor model. Equity holds 52% of all bank accounts in Kenya. Equity's client base also doubled since their last CGI visit, from 1.4 million depositors to 2.8 million. Equity has been able to scale (7 of 10 accounts opened in Kenya today are opened at Equity) because they tried to remodel the bank to meet the needs of the poor. For instance, they structured a low-cost, simple savings product to be more competitive than otherwise available to population (typically under than mattress). Getting the product right, as well as the system to deliver it, has helped Equity become one of the most innovative, fastest growing, pro-poor financial institutions in the world, none of which would be possible, he says, if the bank were unable to collect savings in Kenya.

At the end of the panel, the Working Group was asked: Given the challenges and needs of the poor, what do you believe are two to three actions that different sectore should take in order to meet the financial needs of the poor?

To the global asset building community, I ask: What do you think?

The Next Big Thing in Microfinance: Savings

Jamie Zimmerman — Wed, 06 Aug 2008 16:18:00 -0400

Last month, I argued that USAID inaptly named a three-day virtual conference on savings as "The Forgotten Half of Microfinance." Instead, I posited:

"As someone working on asset building and financial inclusion for the poor (and/or their cross-fertilization in the development field), I would contend that the hosts got it wrong when chose the title for this event. Indeed, "savings" is not "forgotten" at all. Though perhaps traditionally underemphasized, I would argue that, on the contrary, savings is the in fact the "next big thing" in financial interventions."

Looks like I got this one right.

Probably to the surprise of the organizers, the USAID/Microlinks Speaker's Corner on savings was overwhelmingly active, with 324 participants from 53 countries. For those who didn't attend this virtual, email-based conversation, you missed out on the experience of 72 full hours of non-stop emails (we're talking hundreds) from both the novice and the seasoned, from non-profit, public and private sectors, all eager share their many ideas and experiences and learn from others how to expand opportunities for savings for the poor, marginalized and excluded around the globe. It was an inspiring and educational experience. You can access the entire forum at www.microlinks.org/sc/savings. Or you can download the compilation document, which contains all postings from the forum. Its 200 pages long.

Not only is savings indeed not forgotten, but a recent article in the Wall Street Journal confirms my contention this is in fact "the next big thing." On July 31, the WSJ published Robert A Guth's piece, "Giving a lot for savings a little," which announced the Bill and Melinda Gates Foundation intention to "donate hundreds of millions over the next few years to programs to spur savings in poor countries." In the article, Bob Christen, Director of the Financial Services for the Poor division of the Foundation, says the foundation intends to invest heavily to get savings back on the world agenda. So, if it's not already there (as I claimed it to be), then it will be soon-and in a big way.

The Global Assets Project is working inform this new movement towards savings and financial inclusion by promoting savings products, policies and programs that facilitate asset building and wealth creation for these populations. Indeed, the WSJ article was printed one day after the Global Asset Project's launch of its newest report: Global Savings, Assets and Financial Inclusion: Lessons, Challenges and Directions. The report addresses emerging global trends, opportunities and collaborations across the fields of asset building, microfinance, policy and financial education. It describes lessons, challenges and opportunities for thinking about how the poor, in developed and developing countries, can build their assets and wealth. Finally, it includes possible next steps that the diverse range of actors working within these fields should take to move this emerging body of work forward.

As this next big thing grows ever bigger, my hope is that the insights, challenges and recommendations in this report can help inform those policymakers, funders and practitioners in the drivers seat.

Girls, Cows and the Way the World Should Be

Jamie Zimmerman — Fri, 11 Jul 2008 16:05:00 -0400

*This blog by Evelyn Stark of CGAP and Jamie Zimmerman originally posted on 7-10-08 at CGAP's new Microfinance Blog site: http://www.cgap.org/p/site/c/template.rc/1.11.1909*

Just released last week and swiftly making its way through the fast lanes of the internet, Nike Foundation's new video for its GirlEffect campaign is stunning and provocative. It resonates with the socially-minded, big hearted idealist in all of us. The video explains how global poverty eradication will come from empowering a girl through micro-credit: the loan enables her to purchase a productive, money making asset (a cow), which quickly snowballs into further financial and social opportunities, more assets, greater social, economic and political empowerment, and into economic development of entire nations and opportunities for all women around the world. You get the picture (but if not - you can watch it here: http://www.girleffect.org/).

At the heart of this new campaign - started by the Nike and NoVo Foundations, with the support of the UN Foundation, Population Council, ICRW, Center for Global Development and Plan International - lies a core and founding ethos in the microfinance movement: empowerment through small loans to women. The powerful message and imagery in this video will likely resonate loudly and emotionally with a large, global audience. But it's also a bit too simplistic in its portrayal of human, social and economic development.

Microcredit may be a catalyst for empowerment, but it will not solve disenfranchisement of girls and women without other mechanisms also working in their favor. These girls need legal empowerment and effective institutions to guarantee such rights. They need access to effective social services such as education and health to fully develop their human capital. They need institutions and systems (at the local and national level) that encourage their empowerment and advancement.

Of course we want and need to support girls to stand up for their rights to be cowherds, MPs, bankers, petty traders or even advertising executives! How we get there from the finance side might just be a microloan for a cow... or, maybe a savings club operating in a safe environment, with a trained mentor such as Population Council and K-Rep found in Kenya; or, a maybe it's a Child Savings Account that matures just in time for secondary school that's needed (see: Xac Bank, Hatton Bank and an experiment in Uganda); or a free goat that might lead to college in the US as it did for Beatrice Birra.

The reality is that the presence of a cow, food cart or other productive asset a microloan can facilitate will not automatically improve a girl's life. Between the microloan to a girl and a world free of poverty, there is a chasm filled with other problems that need to be solved.

The video will be an effective starting point to raise awareness of the potential power of microfinance. But it's also a challenge: what can we do to make it a reality?

Savings as a Financial Intervention: USAID online conference July 8 - 10

Jamie Zimmerman — Mon, 07 Jul 2008 16:37:00 -0400

This week USAID's knowledge sharing website, Microlinks.org and MicroSave are hosting a three-day interactive, web-based discussion on "Savings: the Forgotten Half of Financial Interventions." This discussion is open to the public and a worthwhile seminar for anyone in the global savings and asset development community (see a summary of topics and facilitators below). To begin my participation in this discussion, I would like to contribute not by posing a question to the hosts, but by sharing with them a simple observation: As someone working on asset building and financial inclusion for the poor (and/or their cross-fertilization in the development field), I would contend that the hosts got it wrong when chose the title for this event. Indeed, "savings" is not "forgotten" at all. Though perhaps traditionally underemphasized, I would argue that, on the contrary, savings is the in fact the "next big thing" in financial interventions.

Savings has been re-emerging as a major theme in microfinance for some time now, and was the main theme of a major symposium the Global Assets Project hosted over a year ago in Singapore. Nevertheless, I agree that we still have much to learn and do in the field of savings for the poor and lower income populations around the world, and look forward to learning from the facilitated dialogue and global experience-sharing this seminar makes possible.

Here's more information on the speaker's corner (from the microlinks website):

Introduction to this discussion:

The rapid growth of the microfinance sector in the past couple of decades signifies its success in terms of outreach and sustainability. Although the sector continues to be primarily supply-driven, changes are underway and service providers have started to acknowledge that the low income are not a homogenous group, but a group that, like any other group, requires a wide range of financial services and has evolving demands.

While the demand for services is changing, on the supply side most of the financial interventions have been credit-led. Savings remains neglected and is probably talked about only when policy or regulatory issues are discussed. This is unfortunate as researchers globally have revealed repeatedly that the low income not only have the capacity to save, but that they save significant amounts (in cash or kind), and also that they lose a lot of these savings either to fraudulent institutions or by theft or natural disasters. In addition, the use of informal savings mechanism is high among low income people.

Further complicating this unbalance between the demand for savings options and service offerings from the supply side is the access to secured services in remote areas, difficult terrains or areas vulnerable to some risk, for example, flood prone areas. Absence of formal savings services results in "financial exclusion" of the larger population.

Join the dialogue:

Hosted by Madhurantika Moulick of MicroSave, this Speaker's Corner aims to bring into focus the various issues related to savings - the forgotten half of the financial interventions - by looking at the demand and supply side of savings, and bringing special attention to savings options in hard to reach areas.

Each day, participants are invited to share their own experiences, questions and comments in the discussion forum:

Day 1 (July 8) - Demand for Savings Needs of Low Income People. What are the needs? Are those needs diverse or homogeneous? Can affordable products be designed that can meet client needs?
Guest facilitator: Lisa Parrott and Sukhwinder Arora.
Day 2 (July 9) - The Suppliers's Perspective on Savings. Why are savings not promoted? Is it due to legal restrictions only, or are other factors in play? What challenges are service providers facing and what opportunities or solutions exist?
Guest facilitators: N. Srinivasan, Renée Chao-Béroff, and Mary Miller.
Day 3 (July 10) - Savings Options in Difficult Areas. What exactly are the challenges in reaching out to rural and remote areas with effective savings services? How have others overcome these challenges, and is technology the answer?
Guest facilitators: Hans Dieter Seibel, Hugh Allen, and Kimberley Wilson.

The Debate over Negative Returns on Savings

Jamie Zimmerman — Mon, 23 Jun 2008 19:36:00 -0400

Our newly released report on thrift in the United States has gotten some good play in the media but has also sparked internal and external debate, domestically and internationally, on the importance of savings and thrift relative to credit and consumption. The report advocates a culture of thrift and a renewed focus on savings (as opposed to our current focus on credit and culture of indebtedness). As a team, the Asset Building program promotes these goals and others heavily in our domestic work as well as internationally through the Global Assets Project.

In recent weeks we've received a lot of feedback (from within our organization and among practitioners and policymakers in microfinance and related fields) wondering if, in a time of higher inflation, we're advocating irrational behavior among our target populations. For instance, Sherle Schwenninger, the director of the Global Economic Growth program here at New America, challenged the asset building team's focus on pushing people to save when typical interest rates on savings accounts are lower than the rate of inflation. That basically means that people are losing money on their savings, instead of gaining interest over the long run on their deferred consumption. On popular microfinance listservs like MicroFinancePractice and DevFinance, the report sparked similar debates over encouraging thrift in developing or emerging economies, which are typically less stable than advanced economies. In India, many savers are earning 1% interest or less on their savings in an 8% inflation climate. In Zimbabwe's hyper-inflation, money not used today is tomorrow's fire kindling. But that is an extreme example. Essentially, the argument is that, in the absence of better products, we are irrationally encouraging people to save up, but to nothing.

Or so it seems, if you don't look at the bigger picture:

Yes, the poor, low and moderate income populations, particularly those traditionally excluded from low-cost, appropriate and mainstream financial services do indeed need and deserve access to more attractive savings and investment options, one's that do not deteriorate their financial assets, but protect and build them.
However, in the U.S. but most especially in many parts of the developing world, the poor lack access to a safe place to put away their savings in the first place. Experience in the micro-savings field has shown that the poor are quite often willing to pay a fee to have someone or some institution safely hold their savings, as it's a much safer prospect than stashing the money under the mattress. They are much less concerned with making a return on their savings than the prospect of loss or mismanagement that comes with not having it safely locked away until needed. Where these options don't exist, you face a potentially tumultuous and threatening environment where even small lump sums are not safe. This isn't just a problem in the developing world. Here in the United States, unbanked Latino immigrants are increasingly targeted for robbery, as because of their undocumented status, they are often paid in cash and lack access to a bank account to store their money.
And for those among this population who do have access to basic savings products, the fact of the matter is that the vast majority are not saving with the intent to make a return on those savings. They need lump sums to pay for certain expenditures like marriage, education, property and even funerals; they need a nest egg to protect them against economic and environmental shocks to which they are disproportionately more vulnerable.

Losing money on savings is very much a bad thing and seems an irrational choice. But then again we must consider all the options from which certain populations get to choose. I mentioned negative return on savings in India, a sad case that turns ever sadder when considering that over 50% of India's population has absolutely no access to formal savings products in the first place, something the government in India is aggressively trying to change.

While designing and offering short and medium-term higher-yield savings products for the poor and underserved around the world is important work and an ultimate goal, it will be of little value until we 1) can provide effective access to banking services and 2) increase understanding of the value of savings and thrift for long-term financial growth and asset building for those populations who have for too-long gone underserved and excluded.

I'm glad that this new report on thrift is forcing us to acknowledge these realities and to think more deeply on how to get people not only into, but benefiting from, formal financial systems.