At present, savings for those living in poverty has received little attention and resources, and nearly 90 percent of families living on less than $2 a day lack access to basic financial tools that can help manage risks and take advantage of commercial opportunities.
"Savings usually represent the least stressful way of meeting needs, for emergencies, for health, for payment of school fees, so they represent an extremely important mechanism for managing risk," said David Cracknell, Africa Programme Director at Microsave, an organization geared toward emancipating the poor from poverty by providing them with high quality, affordable savings, credit, and insurance.
As there are limited formal savings accounts available, and many banking institutions have high minimum deposit and balance requirements, these unbanked must resort to keeping their savings in stockpiles of goods, livestock, and jewelry for trade. The money they earn must be kept on their person, hidden in their home, or invested informally.
There are, however, many dangers in keeping the money outside formal savings institutions.
"Robbery is one of the risks of keeping your money at home," Stuart Rutherford, founder of Safesave, said in an interview with MediaGloabl. "Others include having the bills blown or washed away by floods, or pilfered by husbands who want a drink or mothers-in-law who know that their daughters-in-law have a small stash of savings somewhere in the house."
"But the biggest risk of all is that you will spend the money," said Rutherford. "Hawkers come by with tempting bangles, children ask you for candies, relatives with bad luck stories persuade you to give or lend the money to them: that is why many people like services such as the susu collectors."
Susu collectors are one of the oldest financial groups in Africa. Acting as mobile bankers, they collect small but regular deposits generally over the course of a month. At the end of this period, the collector returns the accumulated savings to the client, but keeps a percentage of the savings as commission.
It has been reported that some people are being charged up to 40 percent for these types of savings accounts. "These services are not exploitative," noted Rutherford. "They are in high demand by people with no other safe place to save who want to get their small daily savings out of the house so they are not tempted to spend them and can use them to build a usefully large lump sum at the end of each month."
Jonathan Morduch, professor of public policy and economics at New York University, agrees, "Deposit collectors provide a useful service. No one is forcing the savers to use this service, so the 40 percent annualized price is best seen as a sign of how valuable people find saving."
While many value the services, it can be a high price to pay for families struggling to overcome the cycle of poverty. Furthermore, it may not always be safe to trust an informal savings collector; there is no guarantee the money will be safely returned.
After several scandals involving susu banking in Ghana, the government began a project aimed at regulating the susu banking industry. Over the past few years, several freelance susu collectors and at least one susu collection agency have reportedly taken $65,000 from their clients.
Although the risks can be high, the benefits are what keep many investing. Microsavings can help build assets, guard against risks like crop failure, and allow for investment in education, providing future generations with greater opportunity.
"Sometimes having a little savings makes a big difference," Rutherford explained. "For example, it may allow you to take your child to the doctor and get a simple case of conjunctivitis cured, rather than ignoring it and have the child go blind later."
In 2006, Finscope Uganda conducted a study in which nearly half of respondents claimed savings as their greatest financial need.
"I would not expect that savings services will systematically lift people out of poverty anymore than I would expect credit to do so," David Roodman, Senior fellow at the Center for Global Development assessed. "But if done on a large scale, it can improve the lives of millions or billions of people: it can ameliorate poverty."
Offering formal savings to those living below the poverty line may not make a significant impact immediately, but little by little it will add up, increasing economic stability, and is likely to significantly improve the lives of those saving.