Policy expertise

Savings at the Frontier

Policy Area
Mastercard Foundation
Nov 2015 - May 2021
OPM contact

Savings at the Frontier (SatF) is a five-and-a-half year US$17.6 million partnership between the Mastercard Foundation and OPM.

SatF aims to learn from ongoing work on the promotion of informal savings groups and other informal savings mechanisms (ISMs) and how they currently link with formal financial institutions on savings, credit, insurance and other financial services.

The programme will directly work with and fund selected financial service providers (FSPs) in the three focus countries – Ghana, Tanzania and Zambia. It is likely that SatF partner institutions will work closely with selected NGOs and other private sector partners. The programme seeks to support the testing, development and implementation of scalable, sustainable and innovative solutions to improve the delivery of formal financial services to the underserved populations in Sub-Saharan Africa.

SatF will also produce evidence and share learning that can contribute to the development of effective, scalable business models for financial services delivery in frontier markets.

The programme was launched in November 2015 and is being implemented by OPM in collaboration with Bankable Frontier Associates, MicroSave, PSD Consulting, Development Pioneer Consultants, Kadale Consultants and other OPM associates.

The SatF team has developed an infographic which provides more information about the savings landscape in each of our focus countries. The infographic is available under the ‘downloads’ tab.

SatF aims to address the challenges facing people currently using ISMs in Ghana, Tanzania and Zambia.

An estimated nine million people in our focus countries who are excluded from the formal banking system are finding value in the informal services offered by savings groups or other ISMs. These people collectively saved US$191 million through informal mechanisms such as tontines, esusu, stokevels and others.

Appropriateness of services, convenience in access and trust of users in the ISMs make them very popular across different segments of society, including poor people living in remote areas – a segment that is generally excluded from mainstream financial services.

However, ISMs only meet some of the needs of their members and are not available to all those who need them. Because of their informal nature, the safety of the cash collected is an important concern. In order to maintain simplicity and equity in the operations of the mechanism and to keep the record keeping burden minimal, restrictions are imposed on how much and how often members can save or withdraw, and for how long As funds start to accumulate, safety of funds becomes an important concern.
Enabling low-income individuals to access a broader set of products and services can empower them with the knowledge, ability and tools to better manage their financial lives. It allows them to manage risk, save and invest for short- or long-term goals and provides other opportunities to improve their quality of life, through both formal and informal options.

Most FSPs still find it quite challenging, however, to reach this frontier market profitably. FSPs may find, for example, that the transaction costs of dealing with ISM users is very high (due to physical distance and low transaction values) and cannot be compensated by the fees being charged.

ISM users may also not be keen to work with an FSP. There may be no FSP branch or agent nearby; the document requirements and processes may be daunting; fees charged by the FSP may seem high; and informal groups/users have to incur additional direct and indirect costs to complete the transactions. In some cases, the interaction between the FSP and ISM is heavily dependent on donor subsidies or corporate social responsibility funds, paying for various costs such as group formation and initial acquisition of the group by the FSP.

SatF is taking a bold and innovative approach that appreciates the importance of ISMs, while also providing the choice to use more formal options.

The 2015 Global Findex notes that making the connection between ISMs and the formal banking system is one of the three most promising opportunities for financial inclusion and could bring an additional 70 million people in Africa into the formal financial system.

SatF aims to bridge the gap between the supply of formal financial services and users of ISMs, thus providing individual members with greater access to savings products that work for them.

The programme is specifically designed to target the populations facing greatest financial exclusion such as women, young people smallholder families and people living in remote areas. We believe that sustainable partnerships can be formed between FSPs and ISMs that will improve the welfare of poor people.

The lessons learned will be shared with broader financial sector stakeholders, so that they can develop, implement and support effective solutions to improve the delivery of financial services to other marginalised populations.

We will do this through the following mechanisms:

  • Market analysis, awareness raising, and market coordination: gathering market information, conducting market analysis, identifying barriers to and opportunities for financial inclusion, facilitating relationships and raising awareness about the programme and opportunities for linkages.
  • Financial support provided to FSPs: around eight FSPs will be selected and provided with funding and technical assistance.
  • Implement and monitor the programme: monitor contractual and technical performance of FSPs, focusing on outcomes and impacts and proactively address the needs of FSP partners and any challenges they face. Funds will be disbursed based on reaching agreed milestones.
  • Research on supply, demand, and impact of linking ISMs and FSPs: The supported research will improve understanding around issues of informality, the financial services needs of the poor, technological innovation of linking ISMs and FSPs, and the effect this can have on financial inclusion and social welfare.
  • Develop and implement a monitoring, research, evaluation and learning (MREL) framework: The objectives of the MREL are to: i) facilitate internal learning to support adaptive evidence-based programme management; and ii) contribute to an expanded knowledge base on what works and what doesn’t work, for whom and under what conditions.
  • Communicate programme learning: The role of communications is to ensure that lessons learned are used by other stakeholders in financial inclusion to develop sustainable products for poor people in frontier markets.

SatF aims to scale up financial services for at least 250,000 rural and semi-urban users of ISMs in the three focus countries via innovative business models led by FSPs.
The programme will identify high potential business models, including the innovative use of technology, and pursue opportunities by supporting FSPs that can become market pioneers and establish an effective link and greater choice between the provision of informal and formal services.

By building an evidence-base on what does and does not work, SatF will contribute to the wider knowledge base on financial inclusion, helping to distil and disseminate insights for effective, scalable approaches that open the door to meaningful financial services for excluded populations around the world.

Project Manager
Associate Consultant
Associate Consultant
Associate Consultant
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