Understanding and Responding to the Savings Behavior of Poor People in the North East of India

When the available options for savings the forgotten half of financial services are studied in the context of another neglected area, the North East Region of India (NER), the situation is grim. The microfinance sector has been expanding rapidly both in numbers and in the diversity of services. This is probably an indication that the so far supply-led sector is now recognizing that the low-income population is not a homogeneous group and has diverse needs. Savings, which had not been at the forefront of financial services delivered by microfinance service providers, is now being discussed. Similarly, formal microfinance initiatives started much later in the NER than in the rest of the country and still have a lot to achieve. For these reasons, this research on savings was undertaken in the NER to understand the specific needs of the low-income population and to design appropriate products and services to meet their needs.

Secure, accessible savings services are the primary necessity for anyone seeking to manage a household budget. Saving is essentially practiced, in one form or another, by everyone, even if the amounts are very small. Thus, the absence of formal savings services results in the financial exclusion of the larger population. The prevalence of thriving informal mechanisms that have evolved to meet the local needs for savings systems reflects the need and demand for savings services. These informal mechanisms also demonstrate the quite significant savings capabilities of the low-income people who use them, and the unmet demand for savings services, even in the NER. This paper examines the demand for savings and how formal financial institutions might respond to it.