Sparking a savings revolution

¬†ESTELI, Nicaragua — There’s an old saying about poverty: Give me a fish, and I’ll eat for a day. Give me a fishing rod, and I’ll eat for a lifetime.

There are many variations in that theme. In Somalia, I heard a darker version: If I buy food, I’ll eat for a day. If I buy a gun, I’ll eat every day.

But these days, there’s evidence that one of the most effective tools to fight global poverty may be neither a fishing rod nor a gun, but a savings account. What we need is a savings revolution.

Right now, the world’s poor almost never have access to a bank account. Cash sits around and gets spent — and, frankly, often spent badly.

“We used to buy a 3-liter bottle of Coke every day,” recalled Socorro Machado, a 49-year-old homemaker in a village here in northwestern Nicaragua. That was a bit less than a gallon, and the cost of $1.75 consumed a large share of the family’s budget.

Then Catholic Relief Services, an aid organization, arrived in the village with a new program to promote savings. It provided a wooden box with a padlock and organized savings groups of about 20 people who meet once or twice a month, typically bringing 50 cents or $1 to deposit in the box.

Some of the money is lent out to start a small business, but the greatest benefit of these programs seems to be that they provide a spur to save.

“Now we buy a bottle of Coke just once a week, and we put the money in savings,” Machado said. She saves about $5 a month in her own name and another $5 a month in her son’s name and has plans to buy a computer for him eventually.

One of the ugly secrets of global poverty is that a good deal of suffering is caused not only by low incomes but also by bad spending decisions. Research suggests that the world’s poorest families (typically the men in those families) spend about 20 percent of their incomes on a combination of alcohol, cigarettes, prostitution, soft drinks and extravagant festivals.

Many aid groups including CARE and Oxfam now offer savings programs in some form, and the Bill and Melinda Gates Foundation is studying how best to promote financial services for the poor. A Web site, www.matchsavings.org, lets donors match a poor person’s savings to increase the incentive to build a savings habit.

Hugh Aprile, a Catholic Relief Services official here, noted that savings schemes are very cheap to start because no capital is used to provide loans. “It’s people using their own money,” he said, “to build far more than they ever thought they could.”

Maybe it’s hard for us to believe considering how much animus there is toward fat-cat bankers, but the world’s poor might benefit hugely from the ability to bank their money safely.

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