Driving from the city center toward the less affluent suburbs in almost any developing country, one is struck by the number of unfinished houses. There are houses with four walls but no rood, houses with a rood but not windows, would-be houses that might have an unfinished wall, etc. Most of theses houses have not been worked on for months. If you ask owners why they keep an unfinished house, they have a simple answer: this is how they save. It would be more practical and safe to save the money on a bank, but banks have not found a way to collect the savings of the poor. If the poor still save brick by brick, it must be because they have no better way to save.
7 to 9% of the urban poor have formal savings accounts. Creative ways to save: joint liability group, merry-go-rounds, etc.
Micro savings revolution.
Understanding the way people think about the future can help resolve a lot of things. The human brain processes the present and the future very differently. In essence, we seem to have a vision of how we should act in the future that is often inconsistent with the way we act today and will act in the future. One form that this “time inconsistency” takes is to spend now, at the same time as we plan to save in the future In other words, we hope that our “tomorrow´s self” will be more patient than “today´s self” is prepared to be. Buy what we want today (sugar, alcohol, fatty food) but to plan on spending money in more responsible ways tomorrow (school fees, bed nets, roof repairs. ). Anticipated acts of self control. The Tea example.
Decisions about how much should be said are difficult decisions for anyone, rich and poor alike. These decisions require thinking about the future (a future probably unpleasant to contemplate for many). Saving behavior crucially depends on what people expect will happen in the future. Thinking about long-term goals and getting used to making short-term sacrifices in order to get there are the first steps, toward liberation from one of the most frustrating aspects of poverty.
Microcredit is just one of many way in which we can help the poor think in terms of a future where some of their long-term goals can become attainable. Better education for their children could probably have the same effect. The sense of security that the future holds provide would encourage savings for two reasons: creating a sense that the future holds promises, and lowering the stress level, which directly impedes decision making ability.