Today, 31 October 2011, is World Savings Day. The World Savings Banks Institute (WSBI) has an interesting website on the day, setting out its history (it was started in 1924 as World Thrift Day), and outlining past events associated with the day. I learned about this from a LinkedIn post, announcing a new technical guide published by CGAP, entitled “Advancing Savings Services: Resource Guide for Funders“. The CGAP post introducing the report is worth reading. It notes the credit bias in our assessment of finance systems, and argues for savings mobilisation to sit at the heart of any financial access strategy. From the post,
“… supporting savings mobilization requires special care because the hard-earned and scarce resources of poor people are at risk if something goes wrong. Financial institutions can fail, and high inflation can erode savings. Appropriate governance for deposit-taking institutions, sound prudential regulation, and effective supervision are all important safeguards. But they are not always in place. Taken together, these factors have all served as hurdles to helping the poor get access to savings services, and so it will take a concerted effort to get past these barriers.”
It is often because of these risks that some low income people choose to invest their savings in more fixed assets – their home being a very real target. On this website we have a focus note on housing and finances of the poor, from the Financial Diaries initiative, led in South Africa by Darryl Collins. The note shows how households built up their housing through borrowing and saving, and by saving building materials in-kind and building their homes incrementally. The point is also raised in a FinMark Trust report which shows how investment in housing becomes a form of long term savings towards retirement (you can find the report, entitled “Evaluation of retirement systems of countries within Southern African Development Community (SADC)” on this website). Indeed, housing is often the most significant investment a household will ever make. That incremental (especially non-mortgage) housing investment is not noted as part of national savings rate statistics is problematic, especially in the African context where the home is often the vessel in which savings are held, whether in bricks, or in cash under the mattress. Strategies to support the growth of savings should explicitly note the role of housing in a household’s long term savings strategy. This is something we should explore further in the future.