Scoping study on informal savings in Lagos - Mar 2010

Financial institutions have long recognized the importance of savings. For the nation’s economy as a whole, collecting large numbers of small-balance deposits produces pools of capital that can be efficiently invested, which is the heart of financial intermediation. The financial services sector also can derive substantial benefits from mobilizing deposits. Access to a potentially inexpensive and stable source of funds is a major benefit.

Most importantly, well-designed deposit services can enable poor people to take charge of their financial lives. Savings can provide a cushion against economic shocks, enabling poor households to reduce financial vulnerability. Evidence from all over the world suggests that the poor want to save, and indeed are saving in a wide variety of ways. In addition to traditional ways of saving β€œin-kind”, the poor have created an extraordinary variety of their own systems for saving money: Esusu (peripatetic) savings collectors, reciprocal arrangements between family, friends and neighbours, marriage and funeral funds, annual savings clubs, Revolving Savings and Credit Associations (ROSCAs), Accumulating Savings and Credit Associations (ASCAs), credit unions, etc. These informal savings options, however, do not offer security of funds, ready access, liquidity or positive real return.

Understanding the degree to which different obstacles limit the development of quality pro-poor deposit facilities in Nigeria is crucial to designing appropriate policy and programmatic interventions. Therefore, EFInA has undertaken a comprehensive scoping study of the market for informal savings services in Nigeria using Lagos as a pilot. The objectives of the study were to identify:

  • The demand and supply of informal savings services accessible to low-income consumers in Nigeria
  • Explore the factors shaping demand and supply
  • Challenges and opportunities for increasing access to formal sector deposit services for the lower income segment
  • What formal financial institutions can learn from the informal savings sector and how those lessons could be applied to product and market development