PRODUCT CHARACTERISTICS - SAVINGS MABS, Chemonics International Inc.

Overview How do people save? Why do people save? Types of savings products Strategies to implement a new savings service

How Do People Save?

Non-Monetary Form –jewelry –livestock –inventory –land –house –durable items Monetary Form –cash –passbook savings –time deposit –bubo-ay

Why do people save?

Retirement/better life - wealth accumulation Emergency needs - illness, disability, death Everyday needs - school fees, food, utilities, transportation, clothing, rent, house renovation, appliances Business opportunities- capital Special occasions - fiestas, weddings

Problems associated with non- bank savings Cash - potential for theft, overspending, demands from family jewelry - theft, loss, difficulty of selling in an emergency livestock - theft, death of animal, difficult to sell in an emergency inventory - spoilage, theft, storage land & house - not easy to sell durable items - depreciation, theft

Bank savings - advantages Withdrawability - easy access Security - no problems of theft, insured Returns - interest income/investment Access to other services - loans Self-financing business capital & other needs - rather than paying 5 - 6ers

Designing savings products Market study Client Friendly Products & Procedures Objectives of the savings service - different products for different needs Pilot program Analysis of pilot program & adjustments

Market Study Potential clients –wage earners –microenterprises –small businesses Needs/Motivations for saving –education –investment –emergencies Competition

Client Friendly Products & Procedures Convenience Simple Procedures Less Restrictive – low minimum balance –low minimum maintaining balance Lessons learned from the Informal Sector

Objectives of the savings service Attractive to clients Maintain good relationship with clients - build trust Cost efficient for the institution & client - product should be analyzed in terms of costs to the client and bank

Different products for different needs Regular Savings Products Semi-Restricted Savings Products Time Deposits

Regular Savings –Withdrawability (easy access) and service are the most important –More useful for those who need ready access - business opportunities, emergencies

Regular Savings +Generally more stable than larger accounts -Administrative costs tend to be higher for smaller accounts and numerous transactions

Semi-restricted accounts –Convenience and level of service –Attractive for those used to the Bubo-ay or who save for particular purposes: education

Semi-restricted accounts +Generally attracts larger savings balances than regular savings -The product is simple for clients to understand but can be more complicated to set-up and monitor

Time deposits –Return or interest rate is most important –Generally attractive for those with longer-term horizons: retirement, purchase of land, or house

Time deposits +Administrative costs are lowest of all three products and they are easier to manage -Financial costs are much higher - Accounts are more difficult to attract (competition) -Risk of ‘hot money’

Designing Regular Savings Access is the most important –hours of service –number of tellers (dedicated to savers) –deposit collectors Trademark is important to distinguish the product from others - ‘Ganansya Box’, ‘Happy Future Savers,’ ‘Grow Every Day’ Scaled interest rates for higher balances Operations and Procedures manual

Designing Semi-Restricted Accounts Easy to understand products If regular contributions are required, there is the need for dedicated tellers/collectors Trademark is important - ‘Partner Savings Plan’, ‘Save for Christmas’, ‘Save for School’ Changes to MIS to facilitate more transactions Operations and Procedures Manual

Designing Time Deposits Interest rate is key - need to monitor the competition Client’s generally have more banking experience Need to be flexible and adjust interest rates regularly Operations and Procedures Manual

Pilot Program Selection of pilot branch close to main branch Committee to coordinate, monitor, and adjust the product Implementation plan

–Product and administrative systems –Procedure manual, internal control, audit, monitoring and evaluation –Changes to MIS –Projections –Training of personnel –Monitoring and Evaluation System

Analysis of pilot program Objectives of the pilot program –Test products –Evaluate demand –Learn about the market place –Establish and adapt accounting procedures, MIS, communication system, audit system, and internal controls –Analyze costs of the instrument

Analysis of pilot program Objectives of the pilot program –Establish the margin between savings and loans - proper returns –Evaluate the cost effectiveness of different types of promotions - raffle for cash vs. appliances –Evaluate infrastructure –Evaluate the efficiency of service –Adjust the training program for personnel

Analysis of pilot program System of Monitoring and Evaluation –Compare actual figures against projections –Structure of deposits –Evaluate administrative and financial costs –Reaction of clients to different products, promotions, and interest rates –Evaluate the efficiency of service

Analysis of pilot program Service Efficiency –Time to open, deposit, and close accounts –Number of transactions per day –Average amount of each transaction –Number of transactions by type & size of account –Time that clients waste in line

ADJUSTED PRODUCTS READY FOR SECOND PILOT STAGE OR ROLL-OUT!