The importance of savings
Many microfinance practitioners focus entirely on credit but this strategy completely overlooks the vital importance of savings which enable people to cope with irregular incomes and emergencies when they arise. Poor people above all need to save what they can, to avoid slipping into periods of real deprivation.
This lesson explores this important topic, basing much of its content on Stuart Rutherford’s seminal work on how the poor manage their money. You will discover how financial services have evolved to make the trick of paying for something now out of past or future income possible. It is a trick that depends on saving.
During the lesson you will be introduced to some of the mechanisms people use for saving and see how different methods meet differing needs. Then you will look at the advantages and disadvantages of providing savings facilities from the point of view of financial institutions and find out why adequate regulation and internal controls are crucial to safeguard people’s deposits.
When you have completed the lesson, you should try to watch “Safeguarding Deposits” in the video section.
