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Nudging the Ultra Poor into Savings Groups in Malawi
Category: Microcredit | By SDR, 2-Oct-2019 | Viewed 390  Comments 0 | Source Paul Rippey

Savings Groups

Nudging the poor
Savings Groups are 15-25 people who come together to save and lend among themselves. Big NGOs trained the first generations of members, but now more groups are formed by members themselves, who pass on what they know to others. They meet many financial needs and provide strong social support.

As popular as the Groups are, the ultra poor are seldom members. And yet, saving has been shown to be important for the poorest, who need a financial cushion more than anyone else.

Grassroots Finance, an informal group of Rotarians and development finance veterans, recently completed a year-long test of nudging the ultra poor into savings groups with World Relief, an American faith-based NGO that runs excellent savings group programs and which has the mandate of reaching everyone, including the very poorest. We worked together to introduce nudges into their program in Dedza Province Malawi, to see if the ultra-poor could be drawn into groups. 

Nudging is based on the idea that people respond in big ways to small changes in the way options are presented to them. Advertisers and marketers already know this, of course. World Relief wanted to use nudges that were low cost, non-coercive and consistent with their values.

We started out in May of 2018 to analyze why the very poorest did not join groups. We looked at the way the program talked about savings groups, because talking to villagers is basically what the World Relief field staff does all day.  We asked the field staff to role play, recorded what they said, and then analyzed the recordings to determine key words, first mentions, and word counts. Among other things, we found that the staff talked a lot about helping people's "businesses"; we knew that the very poor don't think of themselves as having businesses, and consider themselves workers in other peoples' business, if they are lucky.

We mapped out test and control areas and worked with the agents in the test areas to sensitize them to the way they spoke. 

The test ran for ten months and the results were startling: in the test zone, membership more than doubled, a much higher increase than in the control zone. New members in the test zone were much poorer than those in the control zone. There is no question that previously excluded segments were now joining savings groups. 

The report of this test can be found at https://tinyurl.com/Nudge-Malawi.

Paul Rippey
Grassroots Finance
Nudging the poor
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