Making a Culture out of Saving Money
By Carolyne Ariokot and Brenda Banura
In a country whose citizens’ saving culture is in its adolescence, with only 54% of Ugandan adults saving an average of UShs6,000 (2018 Finscope Report respectively), commemorating the World Savings Day provides a great opportunity to highlight why saving money is essential.
Saving money enables you invest, put your money to work so that it generates income and appreciates. From asset accumulation to taking up investment products from fund managers, there are varied investment opportunities to choose from.
When you save money, your credit score improves. For people who don’t have assets to use as collateral when in need of loans, saving money accumulatively will help improve your credit score because it means that you are more likely to pay back. This is why, it is common for savings and credit cooperatives to give credit whose value is twice or thrice your saving balance.
Among other lessons, the post Covid-19 pandemic effects demonstrated the importance of saving for emergencies. Saving money enables you deal with uncertainties better and reduces your economic vulnerability.
The 2020 Covid-19 Finscope report (which identifies and describes financial service needs and the gaps in financial service provision), showed that 57% of Ugandans would not be able to sustain their lifestyle after just one day of lockdown. 81% would not be able to sustain it after 15 days. This lack of financial preparedness is partly because of the poor saving culture.
For some individuals especially those in the rural areas and people without steady incomes, despite the multitude of benefits, there just isn’t any money to save after spending on the basics. Therefore, as advocates of financial inclusion, the Financial Sector Deepening (FSD) Uganda has transitioned from viewing access to financial services as an end, to viewing it as an enabler. Financial services include saving, credit, payments, and insurance. The financial inclusion efforts now go beyond individuals and businesses opening bank accounts to leveraging finance services to increase productivity, incomes and employment, access to basic needs and overall economic growth.
By leveraging finance services to increase productivity, we are supporting financial service providers such as banks, insurance companies and financial technology companies to design related products that enable people increase incomes and opportunities to access and utilise financial services such as saving money.
To advance these efforts, in 2019, Opportunity Bank rolled out a group loan product that enabled Christine Abur, a small-scale farmer in Kiryandongo district in Northwestern Uganda rent farming land that enabled her to increase her productivity and income.
Abur narrates her experience saying, “I have been a farmer for a long time but the harvest from my half an acre of land was just enough to feed my family. I knew that renting land in the neighborhood would enable me harvest much more so that I can sell off the excess, but I just couldn’t afford to rent extra land. In 2019, Opportunity Bank educated women in my village about their group loan product and advised us to form a group, start saving and get loans. I joined a group with which I saved Ush50,000 (about USD13) per season. I saved for three seasons and my group guaranteed me to get a loan of UShs450,000 (about USD118). I used the money to rent land, buy seeds and hire extra labour. My harvest increased and so did my income and savings. I plan to rent more land, increase my income, and save a lot more.”
FSD Uganda shares learnings from interventions such as these with other financial service providers to serve as a benchmark to extend similar services to the wider population.
Just like a group loan product was developed to enable Abur increase her productivity, financial service providers design or enhance their various products to enable the different categories of clients especially those at the bottom of the pyramid to access basic services such as health, education, and housing.
Ultimately, an increase in income for individuals and businesses stimulates active participation in the financial market by transacting to meet different needs. This is bound to see an increase in the number of people saving money and the amounts being saved.
Photo credit: Image by jcomp on Freepik