Savings products and services have traditionally been designed assuming rationality and willingness of people to save and liquidate towards life-cycle goals. However, in real life, low-income mass market people continue to save in low (or often negative) interest bearing informal savings schemes, and do not commit, choose and/or continue medium or long term savings programmes designed by formal financial institutions. This Note analyses these trends through a behavioural economics lens and tracks the behavioural factors responsible for – preferences for informal savings; procrastination towards savings commitment; discontinuance of committed savings; and overwhelming preference for “fixed return” schemes.  The Note suggests alternative strategies that can enhance commitment and usage of formal savings schemes, especially in low income mass market segment.

Leave Comments