Helping The World's Poor Save A Bit At A Time: Gates Foundation Funds Microsavings Initiatives Far more poor people want to save rather than borrow money. So, the Bill & Melinda Gates Foundation is putting $500 million toward studying and expanding microsavings programs in places like Malawi, where a banking kiosk operates out of a butcher's shop.
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Helping The World's Poor Save A Bit At A Time

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Helping The World's Poor Save A Bit At A Time

Helping The World's Poor Save A Bit At A Time

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Micro lending - making small loans to the poor - has been much talked about. Micro savings is a newer idea. That's because poor people in the developing world often have a hard time putting money aside. The Bill and Melinda Gates Foundation wants to change that, and it's putting $500 million towards the effort. NPR's Wendy Kaufman reports.

WENDY KAUFMAN: It's pretty intuitive to think the poor in Africa or India might need to borrow money. But it turns out that far, far more poor people want to save money.

Ms. MELINDA GATES: The poor do save; they already save.

KAUFMAN: That's Melinda Gates speaking at a recent forum on global savings.

Ms. GATES: We're unlocking something they do. So, if you go talk to poor people, they know, I mean, they have incredible asset management, most of them.

KAUFMAN: They might buy livestock or jewelry they can sell when they need cash. But animals die and a necklace can get stolen. Commercial banks in the developing world have shown little interest in providing the poor with financial services.

Believing a new approach was needed, a few people have begun to innovate on the savings front. Bill and Melinda Gates started to pay attention.

Ms. GATES: It really is all about how do you create something at scale that will help people transform their own lives?

Mr. ALEKSANDR KALANDA (Opportunity International Bank of Malawi): We went into a market and established a kiosk in that market, out of a butchers shop.

KAUFMAN: Aleksandr Kalanda heads the Opportunity International Bank of Malawi. He says initially shoppers were suspicious of his mini bank, and mainstream bankers laughed. But today, 12,000 people save money at that one site alone.

Mr. KALANDA: Virtually everybody in that market is banking with us.

KAUFMAN: And so are people in the neighborhood. Many deposit 75 cents at a time and their average balance is less than $85. But add it all up and you get to a million dollars. Because the bank's customer base across Malawi is large and the bank's transaction costs, low, it can make a profit.

Another model is in Kenya, where M-PESA allows people to use mobile phones to transfer and save money without opening an actual bank account. The Gates Foundation funds will go to expanding programs like these, promoting new ideas and studying what works.

Saving by itself isn't enough, says Gates. She wants to know does the money put aside actually improve lives? For example, does it allow the poor to expand their harvest? Early results from Malawi and elsewhere, she says, are encouraging.

Ms. GATES: The change that we have seen in this field, in the last three years, is astounding. And I think the change, if we sat here and talked about it three years hence, is going to be quite phenomenal - both in terms of the number of poor being banked - and how their lives are changing.

KAUFMAN: Many experts in global poverty applaud the foundation's push into micro savings. One of them is Yale economics Professor, Dean Karlan. But he cautions that you don't want the poor to be saving money at the same time they're borrowing it at very high interest rates. And, he says:

Professor DEAN KARLAN (Economics, Yale University): The last thing we want to do is let micro savings become the next micro credit, where its advocates pretend like it is the panacea against poverty; that it's the silver bullet.

KAUFMAN: Rather, he suggests micro saving is just one step in solving the very complex problem of global poverty.

Wendy Kaufman, NPR News.

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