Melinda Gates Challenges Global Leaders: Create Savings Accounts and Bring Financial Security to the World’s Poorest
Melinda French Gates, co-chair of the Bill & Melinda Gates Foundation, today hailed a historic moment that will help bring financial services, particularly savings accounts, to hundreds of millions of people living on less than $2 a day. Speaking at the foundation-hosted Global Savings Forum in Seattle, the first global gathering focused on the role of savings in the developing world, Gates urged leaders in government, banking, mobile communications, and international development to work together to build a new kind of financial infrastructure to bring savings to the poor. She also pledged $500 million from the foundation over the next five years to expand savings.
“This is an amazing moment. The stage is set for incredible breakthroughs,” Gates told nearly 200 influential world leaders who gathered for the two-day forum. “As last week’s statement on savings by the G20 proves, financial inclusion is on the global agenda at the highest level. And innovations are happening so fast that, for the first time, the world has the opportunity to provide even the poorest people with access to financial services.”
Savings accounts are in great demand by the poor in the developing world. Research shows that when they are offered side by side with loans, people chose savings over loans at rates of up to 12:1. In one study, Malawian farmers who were given the option to put aside some of their earnings toward the next planting season increased their farming inputs by 64 percent, resulting in 54 percent higher farm revenues, and 30 percent higher day-to-day expenditures. New research also shows that safe savings options can empower women, help people manage risks, like illness and job loss, and increase investment in livelihoods. Still, less than 10 percent of the world’s 2.5 billion poor have access to formal financial tools.
“Savings doesn’t just help people mitigate the risks posed by a medical emergency or a bad crop,” said Gates. “It also gives them the ability to marshal their resources to build something better for themselves and their children. It allows them to fund their own businesses, to look ahead with confidence. Savings helps families to take the giant leap from reacting to events to planning for a healthier, happier future.”
Gates was joined by influential leaders who discussed the vital role financial services play in improving the lives of the poor, including Her Royal Highness Princess Maxima of the Netherlands, U.N. Secretary General’s Special Advocate for Inclusive Finance for Development.
“I am a strong believer in the power of financial inclusion,” said Princess Maxima. “When financial services are provided properly, they can help people grow their businesses, shield themselves against unforeseen shocks and make better lives. And I cannot stress enough the importance of savings accounts. Savings is a debt-free way to make investments and take advantage of opportunities, whether starting a business or sending a child to school.”
As a part of the foundation’s $500 million pledge, Gates announced a package of six new grants totaling $40 million. The grants support projects and partnerships to improve access to savings and other financial services, including:
- Expansion of bank and microfinance services to include savings accounts
- Implementation of new approaches to reach the poor with savings, such as branchless banking and mobile money
- Research to identify how people use formal and informal financial tools, including savings, credit, insurance, and payment services, and to analyze the impact of financial services on the lives of the poor
Technologies such as mobile phones are already providing safe, reliable, and easy options for people to access financial services. Sixty-nine percent of the developing world already has a mobile connection, and this number is expected to climb to 98 percent within five years.
“Technologies like mobile phones are powering a next-generation banking system,” said Chris Locke, managing director of the GSMA Development Fund. “We now have the opportunity to put this to work for the developing world, offering the poorest people tools to manage their assets and build financial security.”
Other leaders who joined Gates included Janamitra Devan, vice president and head of network, financial, and private sector development for the World Bank-International Finance Corporation (IFC); Njuguna Ndung’u, governor of the Central Bank of Kenya and steering committee chair of the Alliance for Financial Inclusion (AFI); Chris De Noose, managing director, World Savings Banks Institute; Yongbeom Kim, director general of Global Financial Architecture Bureau in the Presidential Committee for the G20 Summit; and Luis Urrutia, president, Financial Action Task Force.
The foundation’s Financial Services for the Poor initiative is working with a wide range of public and private partners to harness technology and innovation to bring quality, affordable, and safe savings accounts and other financial services to the doorsteps of the poor in the developing world. Since 2006, Financial Services for the Poor has already committed more than $530 million to explore ways to increase access to financial services.