Wanted: Champion for a savings revolution

The Philippines continues to have one of the lowest savings rates in the region, caused by a mix of a higher poverty rate spread over a wider population, lack of values that inculcate savings, and the poor availability of savings facilities outside urban sprawls.

Poverty continues to be a challenge to our government, especially now that the country has been experiencing continuous economic growth for successive years.

While the poverty rate has somewhat improved over the last few years, the fact remains that there are still more than 26 million Filipinos living below the line, with 12 million ranked as among the poorest of the poor, not having the means to fend for themselves.

The incidence of poverty has been more prevalent in the countryside, and much higher in the conflict-laden areas of Mindanao where extremist armed groups are lording over. With regards the latter, the immediate remedy before anything else is effective counter-insurgency and immediate restoration of peace and order.

In other areas, without an effective program to bring down poverty rates, it will be difficult to continue growing the economy at the a robust pace in succeeding years, and inclusive growth based on better productivity by more Filipinos will be a far-fetched reality.

This means focusing on more the basic sectors of the country which has consistently been affected by poverty, namely, farmers, fishermen, children belonging to families with income below the official poverty threshold, self-employed and unpaid family workers, and women belonging to poor families.

Getting into the habit

One of the remedies that development agencies have been promoting lately, aside from improving the productivity of all family members of farmers and fishermen, is savings to help stop the rise in poverty.

This has been part of the package of such big groups as Plan International in their development work in the Philippines. For example, while working in affected areas where Super Typhoon Haiyan struck, the non-profit foundation implemented community saving groups to popularize the need to save.

It starts with empowering people who live in poverty to believe that they can do something to get out of the trap by embracing the concept of savings. Simple programs like the community savings groups, something that is akin to our current paluwagan savings systems, are introduced.

This is a first step before community savings group members accept the value of relying on more formal savings institutions like cooperative, thrift banks or rural banks that offer better protection for their hard-earned money.

Can people living below the poverty line really save? Many development agencies believe it is possible, and have proven this doable – even among the ranks of those living in extreme poverty and ranked as among the poorest of the poor.

Spirits and cigarettes and other non-essentials are just some of the purchases that are discouraged in community-based savings programs, and it has been tested and proven that this simple task, when embraced by the families, has enabled dreams (like sending their children to school) to become a reality.

Commitment savings

The role of thrift banks, cooperatives, and rural banks in promoting and spreading the value of savings in rural communities where there are still big communities of fishing and farming households cannot be undermined in a nationwide campaign to promote savings.

Particularly effective in the experience of many development agents is the implementation of commitment savings programs. Here, depositors are encouraged not to withdraw from their funds until they have accomplished what they had aimed for, usually a certain amount equivalent to a need (house repairs, education or appliances).

Program evaluations showed that most of those that availed of commitment savings accounts were able to maintain the habit in future years, and more importantly, educated other members of the household to respect the value of savings.

For farmers and fishermen, commitment savings can be translated as an option to capital building instead of relying on borrowings – usually from informal money lenders that charge an arm and a leg.

By saving part of their harvest before (not after) deducting household expenses, they are able to use their own generated funds to buy new seeds and finance the next planting season, or pay for their boat repairs. This actually makes them less dependent on loans.

The advent of mobile banking tools by telecommunication and remittance companies should also give better incentives to enter the formal banking system, and therefore be more aware of the need for financial planning.

The use of mobile devices has even helped encourage bank clients in the countryside to save through SMS. The more socially-relevant development banks send out carefully framed messages to remind their account holders to fill up their passbooks.

Our low savings rate is believed to be one of the reasons why the country’s economic growth is so lopsided in favor of the rich and those living in the urban centers. Effort must be given to change this current consumption-oriented habit.

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