In December, we shared an article by Ignacio Mas that described how microfinance is being ‘reframed'. That is, until now microfinance has implied micro ‘funding' of poor clients with loans, whereas many now recognize that going forward, microsavings will be a critical instrument to meet the financial needs of base of pyramid customers. Ignacio's December article outlined the four key elements in the discussion underpinning the viability of bringing microsavings offerings to market. Today, we're sharing a new article by Bob Christen and Ignacio Mas. This article elaborates on why savings is so important - and suggests how the microsavings model might work in practice. That is, what role each player, including mobile operators, banks and MFIs, might play in developing a system capable of delivering microsavings to all, profitably.

The Financial Services for the Poor team at the Bill & Melinda Gates Foundation sees as its core objective in its mobile money work stream to help develop scalable, profitably sustainable and internationally replicable models that bring high volume, low value transactional platforms to the communities where poor people live and work. We believe this can be an effective mechanism to deliver convenient, safe and affordable savings services to poor people, which in turn can help them better deal with the socioeconomic opportunities, life cycle events, uncertainties and risks they face.

In light of the recent publication of “Poor Economics”, the new book by Abhijit V. Banerjee and Esther Duflo, MMU caught up with Dr. Duflo to discuss some relevant themes to help our readers understand the broader impact of mobile financial services in the economics of the poor. Today, we publish the first part of our interview focusing on the topics of financial inclusion and savings.

For more than fifteen years Abhijit V. Banerjee and Esther Duflo have worked with the poor in dozens of countries spanning five continents, trying to understand the specific problems that come with poverty and to find proven solutions. In this second part of the interview, Dr. Duflo discusses the topics of mobile money, insurance and credit.

Mobile money providers are increasingly pondering the path from payments to savings. If people were comfortable keeping higher e-money balances it would likely increase the activity rate on mobile money transfers, as well as reduce the proportion of transfers that are converted back into cash – a costly step.