This paper discusses how low-income people in South Africa (SA) save, how they use different savings services/systems and the impact of these savings facilities on their household budgets/lives. It also discusses how these findings would improve Ithala Bank's and other institutions' efforts to mobilize savings.
Specifically, the paper:
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Studies savings services used and not used by low income people;
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Examines the perceived advantages and disadvantages of these savings services;
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Assesses the socio-economic characteristics of the people using them;
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Explores how savings services are used to manage household income;
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Investigates why some people save in kind and which financial services may induce them to start monetary savings;
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Draws lessons for Ithala and other financial institutions seeking to develop poor-responsive savings services.
The methodology that the study uses is:
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Focus group discussions;
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Interviews with low-income people and Ithala officials.
The findings of the paper are:
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35 savings products were in use - 17 were Ithala products.
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The most used products were:
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Short-term loans from moneylenders;
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Cash saving through Accumulating Savings and Credit associations (ASCAs);
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Targeted savings through Ithala;
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Funeral schemes or burial societies.
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Ithala had intense competition from informal sector products.
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Most Ithala clients were low-income people of low literacy, and a significant number were senior citizens.
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Use of informal sector products was greater than that of the Ithala products.
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The paper concludes by recommending that Ithala should incorporate some informal sector features into existing and future products.