When I traveled to Haiti to study savings in 2008, I found very little savings. Poor people saved in modest amounts. Some were depositing in clubs called mutuelles de solidarité or in local rotating savings and credit associations (or ROSCAs).
But after asking around bit, I found that there was significant money in borlettes.
The borlette system in Haiti is hard to ignore. Part casino, part dream parlor, part bank, the borlette network gleams on the retail landscape. Every urban street, rural cross-roads, and tent city pathway is packed with tiny kiosks (lettered in vivid colors with the word “bank”) that sell lottery tickets. Kiosks are privately owned, with some operators managing one stall and others hundreds. Patrons can pay as little as 12 cents (US) and look forward to payouts at the end of the day of up to 50 times their wager.
This low entry of a few cents adds up to a big industry, which totaled USD 1.5 billion before the earthquake and has sprung back to life since. Nearly everyone plays—a collective national activity that keeps the estimated 35,000 borlette stalls running and their 100,000 workers employed.
If we could understand what made the borlette so powerful, we might be able to adapt some of its features to create better savings products.
We tried this by designing a prize-linked savings (PLS) product which could allow us to tap the impulse to gamble and redirect it toward safe savings.
These types of products give consumers the opportunity to save money and, in lieu of a regular interest rate, receive chances to win money or prizes based on their savings balance. The lottery or prize component of a savings product can be run in different ways. The chance to win a cash or kind prize is offered typically in lieu of interest on savings. Variations have been implemented in diverse geographies, from the UK premium bonds to Colombia and Mexico’s prized-linked deposit accounts.
But there was another aspect of the borlette that stood out for us. The borlette as a savings device offered an element of fun and play not accessible through other options.
All sorts of industries are discovering how people can have fun, play games, and engage in positive behavior. A couple of years back Volkswagen launched a marketing campaign called the “Fun Theory” where by simply making mundane tasks fun, people were convinced to engage in behavior that benefitted them or their environment. D2D Fund working on the unbanked in the U.S. has shown that video games can increase financial skills and capability among low-income adults. Their game Bite Club offers players a simulated game experience in which they learn to manage debt payments and current spending needs with saving for the long-term goal of retirement on the other.
But more research certainly needs to be undertaken on linking our desire to have fun with services that motivate us to engage in beneficial financial behavior, like savings.
The author would like to thank Kabir Kumar, Yanina Seltzer, and Toru Mino for their contributions.
I am currently setting up a microfinance program called ‘Manna Microfinance Limited’ in South Sudan, waiting to be decalred as a new country on 9 July 2011. Yes, savings is a fun and it is a first step towards development for poor communities. I have already organized few group in Juba (South Sudan’s proposed capital}. I found that people are willing to save USD2(appox.) per week. But I found that people’s prime motivation for savings is loan. I am trying to teach the value of savings and insist to the people that savings should become one of their habits and it is expected from them that they should teach their children also. I am also teaching them that “Savings first Credit next”. I am making a small effort in making the people to understand that “savings is a fun which brings colour to their lives at all levels.(person, family and community)
Like B F Skinner, I believe in the power of a carefully designed variable frequency schedule of positive reinforcement to shape and maintain behaviour. This, combined with the human ability to live vicariously, is what keeps the lottery and gambling industries going in all their various forms.
When applied to the provision of incentives for savings, behaviour modification theory merges with marketing practice to identify and provide incentives that are relevant to our target savers. Recognising the shortcoming of the economist’s belief in a purely rational basis in human decision-making, the most effective incentives also have an emotional appeal: they’re fun too!
Not knowing just how Haiti’s borlettes work, I wonder how they can justify the word “bank”? Your description suggests their customers are making a purchase when they play the daily lottery. If so, there’s not much savings taking place there.
But they do meet criteria for a successful incentive-based mechanism: immediacy, easy to access, perceived as providing value, and with the emotional frisson of the possibility of realising a dream or two — all done on a sufficient variable frequency schedule to ensure repeat business (and, undoubtedly, handsome profits for the operators).
Yes, let’s unleash our creativity in the design of savings programmes that go beyond the economically rational and provide participants with an experience that makes them laugh and smile as they build a financial asset.
Dear Kim Wilson
I agree that informal institutions teach us vital lessons on effective means for ushering in qualitative development . For faster financial inclusion with social acceptance from demand side, it is therefore sensible to take cognizance of the local values attached in the various modes of traditional financial services in the informal sector particularly accessibility and flexibility in serving the clients. As in the case of Haiti, the saving product of borlettes is linked to lottery fun which has more social values of the local people facilitating more poor people financially included. The ultimate purpose of this linkage of saving with lottery or any attractive incentives is mobilize savings and ensure protection to the savings of the poor from wasteful or unsocial expenditure.
On similar account with the appreciation of indigenous cultural and religious values, some of the formal institutions in the Asian countries studied (APRACA-IFAD Microserv publication 1998 “ Extending a helping hand : Matching the financial needs of the poor by Dr Rengarajan.V) , have designed some incentive linked savings products such as . the savings product SIMPEDES of BRI Indonesia linked with non cash lottery, ‘Patriot Muda’ of Bank Pertaninan Malasyia (BPM) is linked to scholarship for deserving poor children, ‘REMEJA’ and Patriotic Tani of BPM linked with insurance, Balaji Archana Savings scheme of Indian overseas Bank is linked with privileges related to religious practices at free of cost in the most famous Hindu temple, Singithi School saving scheme of Hattan National Bank(HNB) in Srilanka linked with incentives like helicopter rides, bicycles, as prize, fancy school items, cash awards, Establishment of depositors funeral aid association by BAAC in Thailand.
In this regard, insurance linked savings product apart from lottery linked one may be of more useful to the country like Haite which is more prone to covariant risks .If fun based lottery saving is successfully promoted locally by borlettes, will it be possible for borlettes shops to act as agents for insurance also so that making financial inclusion more inclusive of comprehensive micro financial services to the target clients for a sustainable poverty redcution?