Why Microsavings?

Microsavings is a hot new idea
in development economics.

It addresses a basic problem
faced by many poor people.

Let's say you have a small amount
of money, say, equal in value to $150

and you want to set up a savings account.

If you take this money to a large bank,
they'll turn you away

or maybe they'll even laugh at you.

The cost of processing the papers,
setting up the account, and dealing with you

means it's not worth while for them
to take care of your very small deposit.

The results is that a lot of this money
just sits around the homes of poor people

and it's vulnerable to fire, it's vulnerable to theft.

In fact, a lot of savings gets destroyed
by some kind of catastrophe

or maybe it's taken by
someone visiting the home.

And a lot of poor people, in fact,
would actually be willing to pay money

to have some opportunity to save
their money in a secure place.

The microsavings phenomenon
is evolving through a few different routes.

Nonprofits for instance are trying
to set up or encourage opportunities

for very poor individuals to be able
to save very small sums of money.

For instance, the Gate's Foundation
has been very active in this area.

Another medium for microsavings has been
actually the cell phone or technology.

Using cell phones in
some parts of the world,

it is possible to save
and store your money

and transfer it to other people
while using electronic technology.

Finally, banks in many countries
face burdens and regulations.

To the extent these regulations
can be moved,

it will be cheaper
to supply banking services

and banks will be more
interested in serving the poor.

That too will make microsavings easier.

Microsavings is, in general, considered
a very promising idea for the future.

If you'd like to do
more reading in the area,

here is one good paper on the topic.