Can people living on $1.25 per day — or less — save money?
Plan International and JPMorgan Chase believe they can. Through their Community Savings Groups project — which Plan and JPMorgan Chase are implementing in the areas affected by Typhoon Haiyan in the Philippines — the international nonprofit and the global financial services firm aim to change people’s mindsets to prove that poverty is no barrier to developing the “habit of saving.”
“There is a lot of behavioral and knowledge transformation and outlook and perspective [in saving money],” Cathy Seco, Plan’s grants manager in the Philippines, told Devex. “[It is in the] realization that no matter how poor you are, if you have the desire and when you look at and assess your circumstances, there is a way for you to save for the future.”
Along with other finance-related programs in the typhoon-devastated areas, including cash transfers and cash-for-work arrangements, the partnership focuses on building the capacity of individuals and households to be smarter in how they manage their finances. The CSG project targets seven communities in Eastern Samar and aims to set up 90 groups, two-thirds of which will be funded by JPMorgan Chase’s foundation. The project’s goal is to reach 2,250 individual beneficiaries, of whom 70 percent are women.
CSGs, according to a news release from Plan, “are a type of microfinance institution that provides communities access to savings, credit and insurance services.” It’s similar to a commonly practiced savings mechanism in Philippine communities known as “paluwagan,” where people or groups contribute to a pooled fund, from which they can save or borrow money.
“After three to five weeks of saving, members can take credit of up to three times the value of their savings, depending on the amount of money available from the savings of the entire group,” according to the news release. “Members then repay the group within three months.”
Seco said pilot operations began at the start of the year and will run until early 2016. She also explained that while it is difficult for poor people to develop the habit of saving, as they often don’t even have enough to pay for their basic needs, it still is possible to change their mindsets by giving them alternative ways to save.
“[Saved money] can translate into something that can help them in the future,” Seco said. “The infusion of values and giving importance to things [is important] like when you want to send your kid to school. If you do a self-reflection, no matter how difficult, if you really want to send your kid to school, you can do something.”
This supports the notion that poverty, as a multidimensional issue, can be addressed by a change in habit fueled by concrete actions. Even Massachusetts Institute of Technology economists Abhjit Banerjee and Esther Duflo shared in a 2007 report that the poorest people in the world have the ability to save — as they can often spend money on alcohol and tobacco, among others — if they have the proper training, capacity and mindset for it.
In the Philippines, where “sin taxes” were imposed on commodities like tobacco, it is possible for individuals who smoke 10 cigarettes a day to save up to 9,125 Philippine pesos ($202) a year if they cut their tobacco intake by half. This is a significant amount that can be used for health, education or the daily expenses of a poor family.
“[The program’s goal is] really strengthening financial capacity, recognizing that within their households, they can do something to alleviate themselves out of poverty, or even if not out of poverty, but you can do something,” she concluded. “The concept is instilling the habit of saving, providing them knowledge and know-how despite their conditions, and realizing what are their needs versus what they want.”
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