Can savings-led programs ensure poverty reduction? Preliminary results from World Council of Credit Unions' (WOCCU) MatchSavings.org program in Mexico, where online donations are used to match the first savings accounts of the poor, reveal a promising approach in developing countries. Can lessons from this program be applied elsewhere?
On October 15, the Global Assets Project hosted a panel discussion that invited a panel of experts to discuss the state of matched savings programs around the world. The event marked the launch of the issue brief, Promoting Savings as a Tool for International Development: Spotlight on WOCCU's MatchSavings.org, and highlighted the experience of the World Council of Credit Unions' (WOCCU) MatchSavings.org in Mexico.
The event, moderated by the Global Assets Project's Jamie M. Zimmerman, opened with remarks from WOCCU Executive Vice President Brian Branch on the MatchSavings.org experience to date in Veracruz, Mexico. Branch shared with the audience how the project works: Inspired by websites like Kiva.org and MicroPlace.com, the program matches the savings of individuals in Veracruz who have never before saved in formal financial institutions. The participants save through the Caja Yanga credit union, and save toward a goal (home improvements, microenterprise expansion, medical payments, or investment in education). Branch emphasized a major objective of the program: to give the poor access to savings services and introduce them to financial services in a more formal system.
Branch's remarks were followed by a panel featuring Daryl Collins (Portfolios of the Poor; Bankable Frontier Associates), Reid Cramer (Director, Asset Building Program), Evelyn Stark (Gates Foundation), and JD Von Pischke (Frontier Finance).
Stark raised a series of questions about the MatchSavings.org, namely: Is the end-goal to scale up, or will programs like these remain smaller, "goodwill" projects for institutions? What is and is not sustainable about the MatchSavings.org model, and how sustainable is the match, given that the repayment of the loan is an intrinsic component of the successful Kiva.org model?
Collins provided a counterbalance, asking: If the poor do save, then is a match necessary? Is the fact that the match brings people into the formal financial system enough of a reason to provide a match, and what might it mean for participants when the match is no longer provided? Collins likewise raised the potential problem of tying savings to a specific goal, which strips savings of the flexibility sometimes needed in times of crisis.
JD Von Pischke emphasized the niche nature of the MatchSavings.org model via using credit unions. He highlighted the fact that small-value deposits are not attractive or profitable to banks, as clients often leave them untouched, and credit unions can therefore fill that niche. Von Pischke brought up a few potential problems that could arise in matched savings initiatives, such as the issues of control, staffing, and intermediation.
Finally, Reid Cramer highlighted the theory and research behind matched savings, and highlighted the potential pathways for matched savings programs in both developing and developed countries.
