For a relatively simple concept, savings is hard to define. People save for a variety of reasons (such as lifecycle, precautionary, income generating), and use a variety of instruments. By analyzing transactional data from the banks, complemented by surveys and financial diaries of clients, GAFIS identified three different patterns of savings behavior: 1) Spend down slowly; 2) Accumulate; 3) Preserve, which excludes other patterns not deemed savings (e.g. Dump & Pull).
Dump & Pull Balance Over 12 Month Period
Balances are maintained for relatively short durations, withdrawn for near-term spending such as regular monthly purchases. High liquidity is required.
Spend Down Slowly Balance over 12 month period.
Balances are built up over time in small steps, often with illiquidity built in, such as a requirement to contribute and/or an inability to access funds until a defined time or goal.
Accumulate Balance Over 12 Month Period.
Balances that are relatively large are held for a longer period with the emphasis on preserving the lump sum until needed.
Preserve Balance over 12 Month Period.
Note: For more detail on the above, please refer to slide 11 on the GAFIS Slide Presentation.
GAFIS mapped the formal savings behaviors (bank account activity), illustrated above, to common “informal” savings behaviors (i.e., using informal instruments), outlined in the Figure below.
These savings types vary in three dimensions: the relative value accumulated, the period of accumulation (or duration), and the client preference for liquidity or illiquidity. Our three savings patterns are shown in their location across these dimensions in the Figure below.
Low income clients today typically use informal products to undertake different types of savings because suitable bank products have not been available or accessible. Broadening formal savings options to support such a range of different types of savings behavior is an important goal of financial inclusion.