Reaching the Poor and Very Poor with Appropriate Savings Services

Over the past ten years, there has been a greater focus on developing savings products that meet the needs of the poor. More and more people understand that even the poorest save. But, reaching the poor and very poor does not happen automatically. Providers who seek to reach people at the very bottom of the poverty scale need tools to understand whether their products are actually reaching their target markets, what products and features are appropriate, and how to market effectively.

Through the integrated use of poverty data and financial data, deposit-taking financial institutions can better understand the savings behavior of their existing customers and the market segments they are serving, and then design products where there are gaps.

The Grameen Foundation and CARD Bank based in the Philippines are working together on a microsavings initiative as part of a three-year project funded by the Bill & Melinda Gates Foundation. CARD Bank is using Grameen Foundation’s Progress Out of Poverty Index® tool and integrating this tool with its customers’ financial data. This is being done to understand whether it is reaching its target markets and to help create value propositions for those markets. CARD Bank has an explicit mission to reach the entrepreneurial poor from rural and urban areas as well as graduates from CARD NGO. Their goal is to reach 60 percent of those living on less than $2.50/day by 2014.

Preliminary results of our work are showing that half of CARD Bank’s new voluntary savers are living below $2.50/day, one-third are living below the Philippine national poverty line (~$1.88/day) and approximately one-fifth below $1.25/day.

Figure 1: Poverty Distribution of CARD Bank Saver

The institution is meeting its 2011 pro-poor target (49%) of serving customers that live on less than $2.50/day. However, CARD Bank would like to reach more customers living on less than $1.25/day.

To do this, CARD Bank is evaluating who is using their savings products. Look at the difference in the following two graphs which illustrates the types of savings accounts CARD Bank’s customers are using based on poverty likelihood. Product A is a compulsory savings account with a flexible option to add voluntary amounts (for loan clients only). Product B is a voluntary demand deposit account designed for customers interested in saving that may or may not be eligible for a loan.

In Figure 2 and 3, we see the distribution of savers by product based on $1.25/day and $2.50/day poverty likelihood, respectively. In Figure 2, there are very few customers using Product B (voluntary demand deposit account). Usage for this product is higher for those living on less $2.50/day. Figure 3 shows a much more even distribution across poverty likelihoods with the $2.50/day line for both products. When we compare the poverty distributions of these savers, we see that a significant portion of the customers are living below $2.50/day, but very few living on less than a $1.25/day are using either savings product.

Figure 2: Distribution of New Savers by Product (Based on $1.25/day/2005 PPP Line)

Figure 3: Distribution of New Savers by Product (Based on $2.5/day/2005 PPP Line)

If CARD Bank wants to increase the number of savings customers living on less than $1.25/day, they will need to target this particular segment. CARD Bank’s next step will be to conduct targeted market research with the $1.25/day customer segment to understand why the current savings products are not meeting their needs and design or re-design a new savings product.

Integrated poverty and financial data is not only useful for product design, it can also be used to create targeted promotional campaigns. As part of the PPI collection process, demographic data is collected. This information combined with financial data allows CARD Bank to tailor promotions to customers based on their income source. For example, in Figure 4, we show fishermen and those in manufacturing who live on less than $2.50/day are the highest users of these savings products. Therefore, a targeted promotional campaign could allow the bank to reach more customers with messages that are tailored to their needs.

Figure 4: Savers living on less than $2.50/day and their incomes sources

Grameen Foundation and CARD Bank are continuing to design, tailor, and market savings products to meet the needs of its customers. CARD Bank will be able to measure the growth of these new products over time and whether they are attracting the customers they were intended to target.

For more detailed information on how a microfinance institution can utilize integrated poverty data and financial data, contact Grameen Foundation at www.grameenfoundation.org.

– The author thanks Grameen Foundation Philippines Savings Team, CARD Bank Savings Team as well as the CARD MRI Research and Information Technology teams for their valuable input.