New Savings Products...New Savings Products Insights, Opportunities, Ideas and Prototypes UGAFODE + MEDA + ideo.org July 2013 2 UGAFODE MEDA fiff.ˆ July 2013 There is a belief that

New Savings ProductsInsights, Opportunities, Ideas and Prototypes

U G A F O D E + M E D A + i d e o . o r gJuly 2013

2U G A F O D E + M E D A + i d e o . o r gJuly 2013

There is a belief that low-income Ugandans lack the money or skills to save for the future.

While this is true for some—many don’t have money today to put away for tomorrow—the reality for most is more complex than that.


Savings culture is strong in Uganda, just not with banks.

Most low-income Ugandans have a variety of informal ways of saving for the future, from investing in assets to storing money under the mattress. These savings tools range wildly in sophistication and security, but combine to offer Ugandans a diverse financial portfolio to help them generate lump sums and plan for their future.


Diverse and beneficial as they may be informal savings tools are still risky and lack many of the benefits of saving with accredited institutions.

To address this, Ugafode Microfinance Limited, Mennonite Economic Development Associates (MEDA), and IDEO.org have teamed up to ask:

How might we design formal savings tools that are better-suited to the needs of low-income Ugandans, especially women and rural populations?

U G A F O D E + M E D A + i d e o . o r gJuly 20135U G A F O D E + M E D A + i d e o . o r gJuly 2013

Our ProcessHuman Centered Design

6U G A F O D E + M E D A + i d e o . o r gJuly 2013 Our Approach

Human-centered design (HCD) is a generative and iterative process through which we gain deep empathy for people, question assumptions, and explore directions in order to identify new opportunities.

* For more about the process refer to the appendix


Our field work20 interviews, 4 group meetings, 3 expert interviews.

Our Approach


Mbarara

Kampala

Masindi

Where we went2 weeks in Uganda, 3 different cities: urban, peri-urban, and rural areas.

Our Approach


Savingin Uganda Existing savings behaviors

and perceptions



Low-income Ugandans are already saving in diverse, often sophisticated ways.

Most Ugandans save their money across a variety of different instruments, each with its own benefits and drawbacks. Here is an overview of the most common savings tools and why people choose them.

Context


Under the mattressThe most convenient—but dangerous—place to store money is at home or work, under the mattress or in a simple container. Most people keep a small amount here for daily use and small emergencies, but some even save large amounts at home, despite the obvious risks.

Investment in assetsPurchasing assets, such as bricks, livestock or land, is a form of saving for many people. By investing in tangible assets they are able to resist temptation and generate additional revenue, but can always sell the assets in a pinch.

Savings groupsCommunity savings groups are popular throughout Uganda, and though they vary in sophistication they all leverage social pressure to help encourage savings. Some groups also offer additional benefits, from funeral insurance to priority loans.

Context


Loans to othersThough not often thought of as a form of saving money, people regularly loan or gift money to friends, family and neighbors, knowing that when they need money someday they’ll be able to count on a favor in return.

Mobile MoneyUsually only used for sending and receiving money, sometimes people use mobile money as a holding place for money to collect for short periods of time. It’s less tempting than cash, but more liquid than assets, groups or bank accounts.

SACCOs or BanksAlthough rarely the preferred way of saving (as outlined in the following pages), many people save in banks and SACCOs to keep their money safe, access credit, and to further diversify their portfolios.

Context


Other Financial Behaviours

Credit It should go without saying that credit plays a critical part in the financial lives of most Ugandans. Though some Ugandans refuse loans for fear of overcommitment, the majority of Ugandans borrow money, either formally or informally, and are often caught in cycles of debt. Though access to credit will be a major draw of any new offering, Ugafode should continue to give loans judiciously.

Safety Though most accessible savings methods aren’t particularly safe from theft, fire or temptation, safety is most important to most Ugandans, and the bank is considered to be the safest way to save.

Education Most potential customers could benefit from and yearn for some form of financial education. With minimal access to formal training and banking systems that don’t speak to their experiences, people are often forced to make uninformed decisions about how to save and spend their money.

Goals Though most people can articulate their long-term goals and ideal outcomes, few have actionable plans for how to reach them and often face difficult, daily trade-offs with pressing short term needs. Even those with Target Savings Accounts often choose it because of the forced savings behavior, and don’t have a clear target for what they’ll buy, how much to save, or when they’ll be ready to withdraw.


Insights Uncovering latent needs



Savings groups fit naturally into people’s lives.

Limited access can be a benefit.

Banks are for "big" money.

Hedging bets is second nature.

Saving in a bank is often too costly.

Money should support the local community.

Saving is an aspiration.

1.

4.

7.

2.

5.

3.

6.

7 Insights about Savings in Uganda


Savings groups work and fit naturally into people’s lives.

Savings groups are the savings method of choice because they’re readily accessible and serve the financial and social needs of their members. Member benefits include: low interest rates, priority loans, access to emergency funds, annual dividends, financial education, solidarity and social pressure to save. Their few pitfalls– risk of robbery, their inability to grow with their members, and their reliance on collective action– do not outweigh the benefits.

1.

Insights


Yurum, Isingiro Yurum, a savings group chairperson, developed a savings group in his community 16 years ago. Over time, the group has evolved many benefits. The group maintains lower interest rates and priority loans for members, as well as, an emergency gift fund for funeral costs and annual dividends. The 44 member group had 16 applications for membership this year.

Insights

John, Myriia John, the vice chairperson of a large savings group, developed the organization to help their community climb out of poverty. But, he recounts, “we have already been a victim.” After putting a portion of their group’s savings in a rural SACCO, the SACCO collapsed, paralyzing their plans for growth.


Hedging bets is second nature.

People feel uncertainty in their day-to-day lives so they diversify across assets and savings methods–property, livestock, crops, in their mattress and in savings groups–to ensure they are prepared for a crisis. Because formal savings products often have the lowest perceived return, are cumbersome to open and are the least convenient, savings accounts are the final option in diversifying their portfolio.

2.

Insights


Kusain, Isingiro Kusain, an Immam and halal butcher, has invested heavily over the years in property, livestock, and rental properties. He reached a point where managing his multiple businesses became too cumbersome even though investing further might produce a high return. Instead, he opened a savings account where he maintains a sum of money in case his other businesses fail and to save for his next big investment.

Maria, Masindi Maria, a 56 year old school matron and farmer, has a savings account but no longer uses it. She doesn’t see the point. Instead she invests in her farm and livestock. It’s easier, she says, to sell a goat in an emergency than it is to go to the bank to make a withdrawal. Nevertheless, even with a dormant account and a bad experience with a failed SACCO, she learned a lot about financial management from her experiences with formal services.

Insights


Money should be active and support the local community.

People choose to keep their money local because they can see the immediate benefit in their community–whether it is through a loan that pays for a child’s school fees or a group purchase that enhances the village. When money is put in the bank, it is perceived to be inactive or used elsewhere to gain profits that are not passed on to the customer.

3.

Insights


Imam, Kampala Imam, a second-hand clothing shop owner in Kampala, believes that hard work is the way to advance in life. He wants the money he deposits in the bank to be used as loans for hardworking individuals like himself because he knows it will make an impact. The loans, he says, could even support a child who might one day become president.

Insights


Limited access can be a benefit.

People try to avoid spending on unplanned expenses, but feel that temptation is all around them–from unforeseen emergencies to helping a friend or family member in need. Individuals desire financial discipline but the path to achieving it is not easy because of the competing demands for their money. So, to avoid the demand all together, they seek out formal and informal barriers to keep funds out of their reach, but still accessible in times of real need.

4.

Insights


Julie, Kampala Julie, a 25 year old youth mobilizer for a local bank, sees value in savings groups as a way to avoid temptation. For example, when her brother needed money for an emergency, she felt obligated to give it to him because it was easily accessible in her bank account and because one day he would help her in her time of need. But, if she had kept her money in a savings group, the money would be “pending”–inaccessible until her next payout.

Dennis, Mbarara Dennis, a boda boda driver in Mbarara, collects payments throughout the day for his services, and loads it onto his MTN Money account, depositing it in his Ugafode account every few days. Otherwise, he worries, he’ll “eat the money.”

Insights


Saving in a bank is too costly.

There are many expenses associated with formal banking that serve as a deterrent to potential customers. Individuals compare the real and opportunity costs of making a deposit with the other options for their money. And, in many cases, those trade-offs don’t add up.

Fees: Opening fees, monthly fees, deposit or withdrawal fees—they all add up.

Transportation: Just getting to the bank can cost thousands of shillings for some.

Time: The opportunity cost of going to a bank is high—it’s time away from business.

5.

Insights


Harriet, Kampala Harriet, a storekeeper in Ggaba, saved 5 million UGX slowly over time to purchase her shop. She saved in a tin at home and in a savings group because opening a savings account, she says, doesn’t make sense for her. A savings account would require her to go to the bank to make deposits–something she doesn’t have time for. I can’t leave my shop, she says, that would be too costly for me.

Insights


Banks are for "big" money.

Formal banking is associated with higher status which leads to the perception that banking is only for large deposits and wealthy individuals. Although ugandans want a banking experience that instills the confidence that their money is safe, they currently feel that banks are inaccessible to them.

6.

Insights


Daniel, Isingiro Daniel, a chairperson, businessman, and farmer in the Mbarara region, waits to accumulate a large sum of money before heading to the bank to make a deposit. He wants to impress the branch manager and says when you make a large deposit, “You feel big.”

Insights


Saving is an aspiration. Though many individuals are savvy investors and informal savers, many have difficulty translating their informal experience in the formal banking system. In fact, individuals don’t recognize the complexities of their financial lives and their expertise in navigating that complexity. Instead, many feel unprepared, insecure when they encounter formal banking products.

7.

Insights


Jonathan, Masindi Jonathan, a 23 year old school teacher and farmer, is a member of a successful savings group that has purchased land, pays dividends, and is hoping to expand. However, despite the success of the group, Jonathan says, “I would love to have an account–it’s my dream.”

Gerard, Ggaba Gerard, a businessman and father of 8, feels his money is currently “too little for a bank.” Nevertheless, he aspires to someday grow his business, hire employees and save in a bank. “When I save in a bank I will become a man,” he says.

Insights


Opportunities New ways to meet customer needs



Low-income Ugandans manage diversified portfolio of assets and informal savings, gaining money and sophistication along the way. They seek out secure places to keep their money and crave financial products that are transparent and easy to understand.

However, there are major barriers, preventing many from making the final step into formal financial services – primarily the real and perceived inaccessibility of formal banking structures and the prevalence of informal structures that serve many of the needs of rural communities.

Building upon these insights gathered in the field, we’ve identified two major opportunities ripe for design to remove barriers to saving formally and develop products that deliver great benefit to end-users.


Accessibility, both in terms of real costs and the perception that banking is only for the wealthy, is a barrier to saving in formal institutions.

How might we make savings a frequent, convenient activity that is accessible to all?


Savings groups are here to stay because they effectively serve the needs of their communities.

How might we support savings groups effectively and build upon their existing structures?

Documents

New Savings Products...New Savings Products Insights, Opportunities, Ideas and Prototypes UGAFODE + MEDA + ideo.org July 2013 2 UGAFODE MEDA fiff.ˆ July 2013 There is a belief that