The Worldaware Award 1999 for Financial Innovation
The Winner: Safe-Save
SafeSave's banking service in the slums of Dhaka, Bangladesh, is based on the view that poor people differ from the rest of us only in their greater need for a friendly neighbourhood banker.
They are unlikely to have cash in their pocket to cope with a sudden illness, or repair the rickshaw on which they depend for a living. They may not even have two taka (2p) to buy kerosene to cook their rice. But SafeSave can supply money either as a loan or from their savings that very day.
One woman, taken ill at night, was able to withdraw savings and get to hospital for treatment. Another comments: "My husband is much happier with me now I am a SafeSave client because he knows we can depend on SafeSave when we have a sudden need."
A third woman's husband was suspicious of SafeSave and opposed her joining it. She says: "My husband's rickshaw was damaged and he needed 100 taka (about £1.25) to repair it. He couldn't get the cash anywhere. I told him I'd get it from my SafeSave account but he laughed. Anyway, Ajibon (the SafeSave collector) let me withdraw 100 taka on the spot. My husband was astonished. He said it was like a real bank after all."
When floods struck one of SafeSave's slums in 1998, there was no massive outflow of savings. People see these as a protection for the future, not to be exhausted in a mere flood. Some people save even if they go hungry to do so.
Bangladeshi organizations such as the Grameen Bank have pioneered lending to poor people. Their customers are expected to form savings groups and to guarantee other group members' borrowings. These borrowings must normally be for productive or money-earning equipment and there are rules for repayment. Clients able to undertake all this have, on the whole been poor, but not the very poor.
Safesave has adopted a less demanding approach and has moved into poorer and poorer neighbourhoods. Its collectors visit clients every day, so that they can save a few taka, withdraw savings, take out loans or make repayments. Clients, most of whom cannot read or write, have bank books in which the collectors record their savings and payments. Collectors are well respected locally. Only one has ever been robbed.
All clients are eligible for loans and they can spend them on what they like. They are allowed a first loan equal to their savings plus 1,000 taka (£12-£13) but permissable loan sizes rise over time. The one thing they must do is pay the interest on their loans (2 per cent a month). The fee for taking out a loan is 100 taka, so it pays to withdraw savings rather than borrow if you want only a small sum.
When a client's savings reach 1,000 taka, a further 250 taka are added to the account. This reflects the interest that a regular saver can earn over five years.
Firoza Begum is one of SafeSave's best collectors. She is about 35 and lives in a one-roomed house with her husband and two children. She cooks on a open fire and draws water from a standpipe near by. She has five years' schooling and only two saris. She has run savings clubs in her slum, winning the trust of local people.
Now she serves 223 SafeSave clients, all living within 220 yards of her home, who have saved about £20 each on everage. They owe, in total, about £6,000 in loans. Firoza earns about £40 a month and has spent some of it on new furniture.
SafeSave was founded in 1996 by Stuart Rutherford, a former architect who got the task of finding what happened to poor people after the Nicaraguan earthquake of 1973. He started ActionAid's programme in Bangladesh and stayed on there to devise better financial services for poor people.
To help him set up SafeSave he recruited Rabeya Islam, a promoter of savings clubs, who got to know slum dwellers when she was an embroidery instructor for World Vision. Her sitting room was SafeSave's first office. Stuart Rutherford has stepped out of the day-to-day running of SafeSave, handing over to Rabeya's son, Mohammad Hossin Islam, who is trained in commerce. Rutherford invited him home from an unprofitable factory job in Malaysia. Money from Plan International helps to finance loans but SafeSave is not looking for subsidies. It wants to show that loan payments are enough to cover its expenses.
SafeSave has about 4,000 clients, a tiny fraction of Bangladesh's population. Several agencies, both international and Bangladeshi, are pursuing the SafeSave approach in other areas.