Savings club is an account created by group of people who own the deposit, regularly increase account value and can withdraw money under some conditions (e.g. time frame). Those accounts usually have some deadline when they mature, e.g. Christmas.
Savings club's structure can help owners to save money. They have to put aside some money each week or month. And after some time they can use that money for a defined purpose. Many people would like to save money, but they cannot resist to buy something they desire, so they spend money quickly.
Savings club can be created without bank account. It is then a kind of piggybank without interest.
Global financial services are very important for development and economic growth. That financial support allows people who are poor insure against the illness or unemployment, fire or flood. These services allow to increase knowledge in financial topic and improve the live. It helps women's, young people, poor people (A. Demirguc-Kunt & L. Klapper 2012, p. 1).
Important thing is also question how easy can we get access to financial staff like bank accounts or something like that (A. Demirguc-Kunt & L. Klapper 2012, p. 3).
People can save on bank accounts. They could create personal accounts or business (A. Demirguc-Kunt & L. Klapper 2012, p. 3).
Second option is saving money with using informal way like savings club or use person which is not from our family. People can also save on their home. It is like piggybank (A. Demirguc-Kunt & L. Klapper 2012, p. 3).
Generally when people do not use bank services they need to use informal way to borrow money. Many of them go to their friends or families. They go to pawnshop when need cash (C.P. Beshouri & J. Gravråk 2010, p. 4).
Also people save money in informal way. They keep money at their house with other person from family, friends. They store money on a savings club on their village. Sometimes they buy different kind of assets (C.P. Beshouri & J. Gravråk 2010, p. 4).
Advantage and disadvantage
Poor population definitely more often use informal options for savings. This kind are available for poor. They have access in their environment. All kind of savings could help people gain their purpose but in informal way there works social pressure and in this way it could be more effective. Members from savings club support other members (J. Kendall 2010, p. 4).
The biggest disadvantage of informal savings is that transactions are exposed to information leakage. Second disadvantage is risk. Informal way are exposed to losses. Advantage of formal accounts is that they are well regulated and financial institutions provide secure (J. Kendall 2010, p. 5).
Informal kind of saving are unreliable. There could be problems with easy arrange of the terms. In formal ways there are always transparent terms (J. Kendall 2010, p. 5).
Savings clubs have lower costs. Banks charges fees and there are some price barriers which they need to be paid customers (J. Kendall 2010, p. 5).
- Beshouri, C.P., & Gravråk J. (2010). Capturing the promise of mobile banking in emerging markets. McKinsey Quarterly, (p. 4).
- Demirguc-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion. The Global Financial Inclusion Index (Global Findex), (p. 1, 3).
- Kendall, J. (2010). A Penny Saved:How Do Savings Accounts Help the Poor?. Gsmworld, (p. 4-5).
- Vonderlack, R. M., & Schreiner, M. (2002). Women, microfinance, and savings: Lessons and proposals. Development in Practice, 12(5), (p. 602-612).
Author: Jolanta Guz