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Did a rat eat your cash? You should have used mobile money

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Posted on April 21, 2011

Dr. Olga Morawczynski is Project Manager, AppLab Money Incubator, and Julius Matovu is Research and Program Coordinator, AppLab Money Incubator, at Grameen Foundation Uganda.

While it is becoming commonly accepted that the poor need better and safer places to save, the story of Muhereza Kabaramagi and her savings struck a particular chord with us.  We met Muhereza while working on Grameen Foundation’s financial literacy pilot project in Uganda..  Muhereza has been a second-hand clothes trader for the past 15 years.  As a small business owner she needs to store cash but lives 30 km from the nearest bank. The trip to and from the bank costs $4, more than what she often makes in a week. So Muhereza decided to save her money in a small handbag at home hidden in a secret place. Recently, Muhereza needed to dip into her savings which had accumulated to about $150.  When she opened her handbag she discovered that rats had shredded her fortune – leaving her with nothing.

Muhereza’s story is emblematic of the difficulties that many poor people in Uganda have in finding safe places to save their money. According to the Bill and Melinda Gates Foundation, “a study of 1,500 poor people in Uganda showed that 99 percent of respondents failed to reach their savings goals when using informal methods, either because the money was stolen or lost, or because they were too tempted to spend the money when it was stored as cash in their home.”

Along with our colleagues at Grameen Foundation we set out to explore how we could make formal financial services and financial information more accessible and help individuals structure their savings to reinforce good savings behavior.  We based this on the hypothesis that the use of mobile money – a term which encompasses the ability to store and send money electronically using your mobile phone – was an effective way to overcome many of the barriers to savings.  Along the way we learned that using what we call “savings mobilizers” or people who go door to door opening savings accounts was an extremely effective way to increase uptake, users appreciate the convenience of using mobile money to deposit money into their accounts, and the vast majority of users who received SMS savings reminders found them effective as a means to remember to save.

As we take this work forward we will be working to see: 

  • Local intermediaries, like our Community Knowledge Workers, used to increase the banked population in rural areas
  • The introduction of appropriate mobile money enabled savings products for the poor and poorest
  • Widespread use of electronic links between the mobile money on a customer’s phone and their bank balance to increase the convenience and use of electronic banking

If you are interested in learning more about our work please read our Financial Literacy Pilot Report.

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