Over the last few decades, one of the most popular anti-poverty schemes around the world has been microcredit — getting small loans to the poor.
Microfinance, generally referring to a range of services aimed at the poor, is now a huge — sometimes controversial — industry.
But what’s been missing from microfinance is savings.
“The poor don’t have a safe or efficient means for saving,” Melinda Gates said today at a Seattle confab called the Global Savings Forum. Lack of savings keeps the poor at risk of any costly emergency, she says, or simple theft.
Today, the Bill & Melinda Gates Foundation announced it will be investing half a billion dollars over the next five years in “microsavings” — helping the poor find new ways to save what little money they do make.
One increasingly popular method involves using mobile phones as basically a hand-held ATM and banking transfer system. In Kenya, a program known as M-PESA (Swahili for money), allows the poor to use their cell phones to buy, transfer and collect small sums of money.
“People in East Africa years ago figured out you could buy and send air time on your phone as a kind of complementary currency,” said Bob Christen, director of financial services for the Gates Foundation. This has exploded into a rapidly growing new industry in East Africa of which M-PESA is perhaps just the first example.
The Gates Foundation wants to build on these kind of innovative approaches to filling in the savings gap when it comes to financial services for the poor.
At the Global Savings Forum, which was held through Wednesday in Seattle, finance ministers, heads of state, bankers, development experts and business leaders are meeting to figure out how to expand savings throughout the developing world.
“It’s going to take a new kind of infrastructure,” said Melinda Gates, who opened the forum in a chat with Princess Maxima of the Netherlands (who advocates on this issue for the UN) and the philanthropy’s head of development, Sylvia Mathews Burwell. “This is really not a resource gap so much as it is an idea gap.”
The very poor, those who may be only to save less than a dollar a day, are of very little interest to a traditional bank. But the poor still need access to savings. Farmers, after selling their harvest in the market, need someplace to safely secure that money for future needs. Mothers need to put aside school fees to make sure their kids can stay in school.
Christen says the philanthropy has found in its exploration of financial services that when you go into a poor community they get 5-to-10 requests for savings services for every request for a microloan.
“In a visit to Tanzania,” Melinda Gates said. “I was just blown away to see people standing in a line at the bank for three hours.”
The poor want to save, she said, and the Gates Foundation hopes to launch a revolution in this area of financial services for the poor.
Here’s the foundation’s statement on its new push into micro-savings and a list of the first round of grants.