Determining the potential of informal savings groups as a model for formal commitment saving devices

Background: Saving behaviour has attracted research attention over the past 20 years. Typically, individual and household saving rates among low-income groups are inadequate. Research suggests that informal savings groups are effective vehicles for encouraging saving among low-income individuals. Yet little is known about the drivers of positive saving behaviour among informal savings groups, which makes it difficult for formal providers to design interventions that promote higher levels of saving. Aim: This study aimed to explore both the rational and non-rational drivers of saving behaviour among low-income members of informal savings groups, the attributes of informal savings groups that positively influence their collective saving behaviour, and to identify the valued features of savings groups that encourage the adoption of informal commitment saving devices (CSDs). Methods: The study was informed by a literature review followed by field research in which semi-structured interviews were conducted with 10 savings groups and 10 individual members of savings groups. The participants’ perspectives were analysed and compared within the context of behavioural economic theory. Results: The study revealed seven characteristics of informal savings groups that potentially serve as interventions to explain non-rational saving behaviour. It also identified seven features valued by users of informal CSDs (including flexibility, restricted access to savings and no transaction fees) which could be salient to providers of formal CSDs. Conclusion: On the basis of the findings, a behavioural design framework was proposed to inform the design features of formal CSDs that may ensure customer retention and improved saving outcomes.