CGAP’s (Consultative Group to Assist the Poor) most recent issue of its Portfolio Newsletter outlined a recent study conducted by Innovations for Poverty Action (IPA) and funded by CGAP that focused on specific marketing techniques to encourage long-term savings among poor Peruvians.
In most developing countries, including Peru, few poor people engage in formal, long-term savings. Instead, they tend to rely on informal channels, such as rotating savings groups. As an effort to encourage savings among this population, in early 2006, Caja Municipal de Ahorro y Crédito, S.A. (CMAC), a Peru-based municipal savings and loan institution, launched Plan Ahorro, a savings account dedicated to the poor. Its partners in this new service include IPA, Catholic Relief Services (CRS), and COPEME (Consortium of Private Organizations to Promote the Development of Small and Micro Enterprises).
Plan Ahorro employs both financial and non-financial incentives to help clients reach savings objectives. Enrolled members receive preferential interest rates when they meet specific savings commitments over a period of six to 24 months. However, previous data reveals that only 58 percent of CMAC’s clients meet their savings commitments, demonstrating that financial incentives alone are not enough to foster regular savings habits among many poor clients. To help clients overcome psychology barriers to saving, Plan Ahorro also offers sign-up gifts, for example the first piece of a puzzle, which when completed, would feature a photo of their chosen savings goal. These gifts are meant to assist clients in keep their long-term goals in mind. In addition, clients receive deposit receipts and letters that highlight the benefits of saving and the consequences of not meeting their commitment.
Preliminary results from the study, which was completed in November 2007, indicate that small non-financial incentives can influence client retention rate, with outcomes depending on the type of incentive. Another surprising finding that was negative messages, like “Remember that if you fail to meet your savings commitment, you will lose your preferential interest rate!”, improved clients’ chances of completing their savings goals by three to four percent. This latter finding demonstrates that message-framing is a cost-effective method for retaining clients. According to the newsletter, the study underlines the point that marketing can have a significant impact on the effectiveness of microfinance services, which are most effective when they can engage and retain clients over the long term.
Full study results will be available in March 2008. The Peruvian case will be compared to other IPA projects in the Philippines, Mexico, Kenya, and Ghana, with the hope that its findings will contribute to better savings program design and marketing around the world.
IPA is a research institution that focuses on finding solutions to problems faced by the poor in developing countries. Its research approach involves program evaluation with randomized trials, re-evaluation under different contexts, and replication of effective programs. IPA’s research team comprises of researchers from leading economics departments who focus on a range of development areas, including microfinance, rural development, and behavioral economics. Its current leader is President and Founder Dean Karlan.
CGAP was established in 1995 to support the development of a sustainable microfinance sector. Today, it is a consortium of 33 public and private funding organizations dedicated to increasing poor people’s access to financial services, and serves as a global information and resource center for microfinance. CGAP serves three groups of clients: financial service providers, public and private funding organizations, and government policymakers and regulators.
By Mary Fu
Additional Resources
Consultative Group to Assist the Poor (CGAP): December 2007 Portfolio Newsletter
Innovations for Poverty Action (IPA): Approach
IPA: Board
CGAP: About
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