Changing Internal Culture to Smooth the Transition from Pure Lending to Savings

Changing staff culture in order to effectively promote new products at a microfinance institution (MFI) can be nearly as challenging as getting customers to embrace the products but the OPTIX project helped one MFI in Vietnam address its marketing problems by connecting it with a peer in Bangladesh that had overcome this hurdle.

The Capital Aid Fund for Employment of the Poor (CEP) was founded in Vietnam in 1991 as an unregulated nonprofit organization to offer credit to people on low incomes in the Mekong region of Vietnam. Over 27 years of operations, CEP had established a strong, credit-focused identity, which drove admirable results for its clients and for the institution.

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‘Stealthy’ Saving: Building on Payroll Credit to Automate Savings

Basic savings accounts are essential to helping people build assets, and they’re often the first step in building a relationship with customers.

This is something Acreimex—a savings & credit cooperative in Oaxaca, Mexico, serving over 120,000 members (as the cooperative refers to its customers) across eight states through its network of 45 branches—understands very well.  Although they are a savings-based institution, some of their customers find it difficult to save. The cooperative has worked with BFA since 2016 to improve the profitability, relevance and accessibility of its product portfolio – and part of these efforts have focused on finding a way to introduce savings to its existing payroll loan customers.

Acreimex’s payroll credit product, Acreinómina (nómina means payroll in Spanish), is offered to employees in over 400 public and private institutions, and is currently the cooperative’s most profitable loan product. These same customers, however, tend to lack awareness of Ahorramás y Más (A++), the cooperative’s flagship savings product which all customers have, but not all use. To increase use of A++ accounts by Acreinómina customers, Acreimex and BFA built on the success of this specific loan product, automating savings alongside the payroll credit payments to drive uptake and usage.

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A Nudge Toward Financial Health

What makes saving money so difficult? After all, when you know money might be scarce tomorrow, saving today is the rational thing to do. Saving should be a priority especially for low-income people in countries with weak social safety nets. So it might seem as if saving should come naturally and feel satisfying. The reality, of course, is that saving is hard for people to do and often feels painful. Despite good intentions and common sense, people routinely end up spending more today than they should—and saving less. Why do people tend to behave irrationally about something as vitally important as saving?

Most clients of the microfinance institutions participating in OPTIX, a project managed by BFA, have small business or microloans and no active savings. Like so many other people, they have a hard time saving, even in small amounts. This does not mean they don’t want to save or don’t try to save. They—along with almost every other person on the planet—may simply suffer from cognitive and behavioral biases when it comes to putting money aside.

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How SAJIDA Foundation Nearly Doubled Customer Uptake of Savings Accounts

Afsana works at a garment factory in Dhaka and has two young daughters. She recently opened an Astha term deposit account with SAJIDA Foundation for 10,000 Bangladeshi Taka ($120) after learning about its benefits from a loan officer. For Afsana, Astha has allowed her to lock away a lump sum which is difficult to do on her limited salary and pressing needs. She explains, “My children are studying. I want to invest money for their higher education. I would also like to save up to build a house in the village one day.”

Astha, a term deposit account, allows SAJIDA Foundation members to save toward a purchase or financial goal. Members can deposit small amounts for a specified length of time while earning at-market interest. Astha, meaning “reliance and dependability” in Bengali, is a product of SAJIDA Foundation, an NGO which offers a microfinance program and various health and other development initiatives throughout Bangladesh, including long-term savings options for unbanked or underbanked individuals like Afsana.

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Banco W: Using Evidence to Optimize Savings and Loan Payment Channel Choices

What does a year’s worth of channel transactions tell us about a client’s loan payment preferences and opportunities to switch channels? Why do clients repay their loans at the same place month after month? How might financial service providers motivate their clients to explore alternative loan payment channels? These are some of the questions that we, the OPTIX team at BFA, set out to learn with our partner, Banco W in Colombia. As financial service providers increase coverage through myriad financial access channels, their customers have an opportunity to switch to a different channel for the same transactions. Understanding client interaction with various channels is a complex mix of preferences, use cases, pain points, business case and scalable feasibility. So where does a financial services provider start?

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