AudiencScapes

By Michelle Kaffenberger
Research Manager, InterMedia
kaffenbergerm@intermedia.org

Poor people have surprisingly complicated financial lives given how little money they have. You would, too, if your “$1 a day” income actually came in the form of $60 on one day, and no dollars for the next two months.

Much of the world’s poor have erratic income streams. Those that work in agriculture may make most of their annual income during harvest time and must budget to sustain themselves the rest of the year. Others work as day laborers or sell wares on the side of roads and never know how much money they will bring home on a given night. (Check out some interesting profiles here for specific examples). The poor understand their critical need to both budget and save money.

The poor also normally have no access to insurance, so a health crisis can have catastrophic
effects.  If the breadwinner of the family falls ill and can’t work, the family may have no income until that individual recovers.  Such a scenario highlights two needs for savings: first, to have money to live off of until the breadwinner goes back to work, and second to have money for medicine or medical treatment so that the worker can get better. 

If a family lacks money for either basic sustenance or for medical treatment they may become trapped with few options for breaking out of a desperate situation.  Often informal moneylenders are their only recourse, and they charge exorbitant interest rates and use violence to enforce loan repayment.

The savings options available to the poor, though, are limited.  Saving money at home, under the proverbial mattress, is unsafe, subject to both robbery and temptation to spend.  Banks tend to be either too far or too expensive, or the quantities the poor wish to save are too small for a savings account.

Much like mobile money has, in many regions, transformed the way the poor transfer money, mobiles can offer a solution for savings.  InterMedia recently interviewed dozens of Tanzanians as part of a mobile money tracker survey, and people had interesting things to say about access to savings mechanisms.  One man in an urban area said, “It is not safe to walk around with plenty of money and so [with mobile money] you can save it and withdraw from any point.”

A mobile money agent spoke about the potential benefits to people in rural areas,

“There are people back in the villages that have money and there are no banks nearby and they would like to save, so if they are empowered in that knowledge [about mobile money] then they can start saving.”

InterMedia has another project underway called the Financial Inclusion Tracking Surveys, which are examining household economic shocks and other economic activities in great depth in Tanzania, Uganda, and Pakistan.  In the coming months, as the data are analyzed, these will show in even greater details the ways that mobile money can help households save and cope with economic crises.  Stay tuned for future papers and blogs on these results.

Despite the recognition of its benefits, however, the Tanzania report shows that only seven percent of Tanzanians have ever saved money with Vodacom’s M-PESA, the most popular mobile money brand accounting for over 80% of the market. Another two percent have tried the savings services offered by Tigo Pesa, the second largest brand. And these proportions are even smaller in rural areas, where access to formal financial services is even more limited.

Mobile money has largely been marketed as a method for saving and receiving money, so it may be that people don’t realize they can save money with their phones. Additionally, saving through mobile money does not earn interest, though given the alternative of a mattress at least it is less likely to be stolen(money can be recovered if a mobile phone is stolen). 

Lastly, mobile money operators generally make money through fees on transfers, so they may not have incentive to push savings as a key element of mobile money. Given the need and demand, though, development of a business model that would promote savings through mobiles would be a worthwhile effort.

The need for savings mechanisms and the technology to provide them are both now present in developing countries; the need now is to connect them.