Zooming in on informal savings mechanisms in Zambia
This study (PDF) by Savings at the Frontier and Financial Sector Deepening Zambia (FSDZ) was conducted on informal savings mechanisms (ISMS), and their users in three provinces in Zambia. The aim was to provide new insights in users of ISMs, how they percieve their groups and formal financial service providers (FSPs), and what drives their decisions to use one service rather than another. Key findings include: 1) Anyone approaching ISMs should expect a variety of groups. Many ISMs are formed not by NGOs, but by people who have learned the approach and gone on to form groups on their own. 2) ISM members also vary greatly. They include the very poor, as well as the not-poor-at-all. 3) ISM users are intelligent consumers who mix and match products from different providers to meet their needs, and an increasing number of Zambians use both formal and informal financial products. 4) ISMs offer a strong value proposition. ISMs provide commitment savings with an annual payback to the saver, quick access to loans, flexibility in repayment, transparency, social support, a feeling of community, networking opportunities, esteem within the community, and proximity. 5) While users appreciate their ISMs, it is rare for ISMs to meet every need of all their users, and they do not find ISMs perfect. One of the greatest unmet needs of many groups is better security. 6) Perceptions and reputation matter significantly. Many of the ISM users have a high opinion of mobile money agents and banking agents because of their proximity and transparency. Many ISM users also carry around unfavourable attitudes about FSPs, especially concerning FSP transparency and social distance.