How low can we go: Catholic Relief Services poverty outreach in financial inclusion
The alternative title here was ‘Persuading the Poor to part with their money’, since, four years ago, CRS set itself a challenge – to test where the limits lay in enabling poor and very poor people to save. Of course, many fairly poor people were already saving with our Savings and Internal Lending Communities (SILC) but in our view not enough poor people had been persuaded that joining a savings group was in their interest or something that they could manage. With EFI, we aimed to reach half a million people and to make sure that the majority of these people were in the lower income half of their communities.
There is an obvious difficulty here: the poorer someone is, the harder it is to save. Having smaller, erratic, and unreliable incomes means that households already struggle to manage their income, loans, and their savings. At the same time, a definition of being poor is that you face an unrelenting mismatch between what you and your family need (food, clothing, household equipment, education) and what you earn (and when you might earn it).
How, on top of all this, can we ask someone to start putting money aside every week for a rainy day when there are probably several ‘rainy days’ every week?
Well, to start with, the evidence is convincing that even very poor households already do quite a lot of juggling to put a bit by here and to borrow there. But the research also tells us that accumulating savings are hard work, especially when savings are kept at home. So it helps poor households to add regular savings away from home and easy access loans to their ‘financial tools portfolio’. Doing this via a group of peers adds in social capital (more folk who know and trust you) along with an annual share-out of the total in the group pot (your share of the group’s savings + interest + loans + fines). But how to persuade the very poor that this is worth the weekly sacrifice?
How did we do this?
Our SILC experts – from all the EFI countries and globally – sat together to brainstorm the problem of reaching poorer populations The result was a 3 pronged approach which we called the pro-poor package. First, we trained our agents to reach out to the poor. We told them, poor people can save and it is your responsibility to seek them out and explain to them – in a suitably reassuring fashion – how it can all work. And we practiced this. Secondly, we looked at all the rules and practices for SILCs and got rid of all those that could be barriers to the poor e.g. fixed savings amounts, strict penalties, pressure to take loans (the poor may be really scared of loans). Then we experimented – half of the EFI project was ‘normal’ and half was ‘pro-poor’ – and we also threw in a hothouse test where we obliged some agents to work in a limited area to see how fast they would go poor. All this was measured with the Progress out of Poverty Index (a low cost, quick survey tool).
How did we do?
Well, something worked. About 2/3 of all 543,000 members recruited under EFI were in the lower income distribution in their village. The results were not even across countries and partners – clearly context and implementation count – but overall, we did go poorer. We call this inclusive saturation because we still welcomed the self-selecting who would have joined anyway. EFI is still unpicking precisely what worked, bringing together the various tools that we used to understand our poverty outreach, but we are particularly excited about how our hothousing worked. In the limited market experiment, where agents had to go deeper rather than wider, 72% were in the lower half of the income distribution compared to 63% in villages with no limit on agent’s marketing. For EFI, this proves that poorer people can save, take loans and benefit from being SILC group members.