Nov 17, 2022

WSBI Report: Remote Coaching to Prevent Dormancy Among Low-Income Savers

WSBI Report: Remote Coaching to Prevent Dormancy Among Low-Income Savers

One of the challenges of providing savings services to the unbanked is that many new customers fail to use the account beyond the initial deposit, a problem known as dormancy. In a recent study from Uganda, a low-cost coaching intervention produced significantly higher levels of account activity and use of banking agents, with stronger effects on women. The pattern of account usage reflects the role that formal savings plays in helping customers satisfy short- and medium-term cash needs. In qualitative interviews with FINCA Uganda’s women clients, they explained that coaching fostered a greater sense of trust and relationship with the bank, and that it encouraged them to set aside even small sums as a form of protection against an uncertain future.

Promoting the Use of Savings Accounts

Low-income individuals have a safe, official option in the form of bank accounts to conventional saving methods like ROSCAs and keeping money around the home. Despite the efforts of several financial institutions to attract these base-of-the-pyramid savers through novel products and distribution methods, there is a tendency for newly opened accounts to quickly become dormant, with no more activities than the initial contribution. The prevalence of dormant accounts raises concerns that formal savings services may not be providing customers with an advantage while also posing administrative and security challenges for banks due to the lack of consumer monitoring, which leaves them vulnerable to fraud.

To combat the problem of dormant accounts, the World Savings and Retail Banking Institute (WSBI) funded a study to test improvements that might drive more active usage, with an emphasis on goal setting, incentives to save, and enhancing the customer experience.

The Effects of Remote Coaching

The study found that while remote coaching significantly boosted the use of banking agents and the values of transactions, deposits, and withdrawals, it had no impact on average account balances. The results among the study’s women participants discovered that the number of deposits made by women grew by 86 percent, and their overall number of transactions doubled.

Factors associated with increased saving by women include the potential for protection against uncertainty, an optimistic view of the future, increased self-esteem, women’s empowerment and access to convenient and user-friendly services. To boost women’s confidence in savings, the authors propose the following “fundamentals of inclusive savings:” (1) provide a simple service; (2) charge no fees; (3) offer access to live help when needed; and (4) provide privacy and safety.

This research was conducted by Scott Graham, Anahit Tevosyan and Nathaniel Mayende at FINCA, together with Ester Agasha from the Makerere University Business School, Dr. Joeri Smits and Sally Yacoub.

To learn more, read the full report here.