Making Peer Incentives Work for Savings

Ignacio Mas is Senior Advisor in the Financial Services for the Poor team at the Bill & Melinda Gates Foundation.

Savings is about making sacrifices today, and that’s easier to do if you are clear on the reward that awaits you. Thus, savings products can be made more relevant for people if they are linked to a tangible goal: paying school fees for the children, buying a bicycle to cut down on commute time, investing in fertilizer at planting season. Savings products that remind people they are saving for a specific purpose are likely to see more savings take-up.

Can we extend the notion of individual savings goals to community-level goals? Imagine a bank opening a new outlet in a rural area and announcing that when the whole village saves a certain amount, it will do something to benefit the whole community: re-paint the school, purchase medical supplies for the local hospital, build a new football field for the youngsters. 

What a way to arrive into town: bringing services, contributing to the community, engaging with community leaders. In fact, the bank might be wise to have the community leaders propose what the prize might be (within a spend limit). Moreover, imagine if the villagers could track the village’s aggregate savings amount. There might be a thermometer-style indicator on display showing how far the village is from the goal. People would get a sense of how their own savings accumulation is going relative to everyone else at the village (“the thermometer keeps rising, but I haven’t saved in the last week!”)

And what if there was a kind of competition between villages for savings (or savings per capita)? Your village could win the regional savings tournament, which might bring an additional benefit.

Might savings become the talk of the town? Would community leaders extol the virtues of savings? Might villagers start gossiping about who might be saving and who not?

Group lending has shown the power of peer networks in instilling certain financial behaviors. Could we turn the notion of peer pressure on its head, and create peer encouragement for savings?