I recently ran across a NY Times blog post written by Nicholas Kristof in May of last year. In it Kristof discusses the importance of ensuring a secure place to save money for the poorest people in the world’s developing countries. He asserts that savings is a more important element of microfinance than lending due to the risks of theft and violent crime in countries whose poorest inhabitants are forced to keep their savings under their own roof. Says Kristof,
“Likewise, the book notes that many poor people must pay to save. That’s right — instead of receiving interest for depositing their savings with someone, they have to pay interest on their own money. One common scheme in West Africa, for example, charges an annual interest of 40 percent for accepting savings. If you struggle to save $100, a year later you have $60. But at least it’s safer than it would be under the bed. If we develop banks that actually serve the poor and accept savings, even if they paid zero interest, that would be a huge step forward and a big incentive to start saving.”
Check out Kristof’s full post here. It’s a short read but an interesting look at the importance of the availability of a secure place to save money.