Microfinance and savings

The paper discusses the degree to which their longstanding informal savings practices influenced the way in which the unbanked poor responded to modern microfinance. The practices are described using evidence from the author's many decades of talking to poor people about how they manage their money. The histories of four very different kinds of microfinance projects are reviewed to examine the extent to which they respect informal practices, and what the outcome was in terms of their success in offering good savings services to low-income households on a large scale. We see how a formal bank first showed how to offer a service comparable to popular 'money guards'; how an NGO-led movement has demonstrated the effectiveness of introducing robust informal group-based savings-and-loan devices to populations that had not previously been using them; and how Bangladesh's famous microcredit revolution eventually spawned a second microsavings revolution.