Global Savings Fund

Melinda French Gates on why it's important that the world's poor have access to savings accounts.

November 16, 2010
Prepared remarks by Melinda French Gates, co-chair and trustee

Thank you, Bob.

Let me welcome you all to Seattle. Thank you for travelling so far to participate in this important meeting.

Over the past several decades, Mohammed Yunus and other pioneers in the microcredit movement have shown the world that financial services can have a big impact in poor people’s lives. But loans are only one piece of the puzzle of financial inclusion. We invited you here to think about another key piece: savings.

Loans for the poor may be more intuitive than savings. People naturally understand giving the poor access to the money they don’t have. They don’t as easily grasp the idea that the poor need to manage the money they do have.

But the poor can and do save, and what I hear from them over and over again is that they want to do it safely and efficiently.

The mothers I meet when I travel talk about the difference it would make if they could afford the lump sums for their children’s books and school fees. Small farmers, most of whom are women, say they wish they had a better way to manage the biannual harvest windfall, so that it lasts throughout the year. People who live in slums explain how unpredictable their income is, and how hard they have to work to achieve a semblance of stability. In short, they tell me that savings would transform their lives.

Savings doesn’t just help people mitigate the risks posed by a medical emergency or a bad crop. It also gives them the ability to marshal their resources to build something better for themselves and their children. Savings helps families take the giant leap from reacting to events to planning for a healthier, happier future.

But when people tell me how savings would change their lives, they also describe the obstacles they face when they try to save. I hear about expensive and time-consuming bus rides to get to the nearest bank branch. And I see the endless lines. Last year, in Tanzania, I visited a bank where the wait was more than three hours.

Most poor people don’t have the money or the time to save in banks, so they bury their cash in a hole in the ground or hide it under the mattress. And it gets stolen, or it gets spent. People often explain how difficult it is not to dip into their savings when they have to keep it in the house.

There is a gap between what poor people need, and what most financial service providers are able to give them. From my perspective as a philanthropist, it’s an unusual gap. Unlike many of the gaps we see in our work on global health or agricultural development, it’s not fundamentally a resource gap. The solution isn’t massive government investment.

Instead, it’s an idea gap. What we lack is not money but knowledge.

How can we make savings services available in the places where poor people work and live? How can banks serve people who save in small denominations? How can we build trust in new savings products, and spread the word about the impact savings can have? Once we answer questions like these, the poor will be able to fund their own financial inclusion.

To unlock poor people’s potential, it will take a new kind of financial infrastructure, and we are here to talk about what that infrastructure looks like.

This is an amazing moment. The stage is set for incredible breakthroughs. 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.

We have new tools. Mobile phones especially are allowing innovations that slash the costs of banking for the poor. We also have some stunning examples of new approaches that are already having a big impact.

In Kenya, M-PESA is showing what storing and transferring money on mobile phones can do for poor people—not only in theory, and not only in pilot projects, but at an enormous scale. M-PESA has almost 13 million users, which is almost 60 percent of the country’s adult population.

And M-PESA is changing their lives in very powerful ways. Unfortunately, in Kenya, when disaster strikes—a bad harvest or a medical emergency—families routinely cope by eating less food. But new evidence shows that households that use M-PESA are able to get through these crises without cutting back on food. To me, you can’t make a stronger case for savings.

I recently visited Mexico to learn about a new program that lets women receive welfare payments through bank accounts at local retail stores. It was just amazing how the innovation had changed their lives.

The women told me what it used to be like. They were assigned a particular day to take a long trip into town to receive their payments. They had to wait all day, in the hot sun, for the payments to be processed. If they couldn’t be there on the assigned day, they didn’t get their payment that month.

But now, everything is different. Women can pick up their payments at their local corner store, the store where they shop every day. Since they can make deposits as well as withdrawals, they are starting to build up savings. And they know it’s safe, because they are given a smart card linked to their fingerprint to access to the account.

The women love the new system. It is local. It is convenient. And it helps them save for the things they care about: their children’s school and health care, or a small business. One woman told me she wanted to invest in another sow, so she would have more piglets to sell.

When you see these tangible early successes, you realize that savings will work for poor people when we get it right.

In recognition of the special urgency of this moment in time, I am pleased to announce that we will invest $500 million over the next 5 years to work with you to advance the savings agenda. These resources are aimed directly at the idea gap. They will help you take risks and test new approaches to overcome the barriers that have led to the financial exclusion of poor people in the past.

At the Gates Foundation, we see our role as bringing partners together to discuss solutions. We know we don’t have all the answers, but we can contribute by helping talented people already in the field collaborate with each other.

Today, I am announcing six new grants, worth $40 million, to support this collaboration. In every area where we invest at the foundation, we rely on partnerships. But our financial services partnerships may be the broadest, most diverse partnerships we have.

Banks, microfinance institutions, mobile phone operators, regulators, retailers, and telecom companies. These are not sectors that typically work together. But you are here to do just that, and that is why I am so energized.

This is historic. It is unprecedented. You are the people who will make the decisions that lead to financial inclusion. You can give poor families something very few of them have ever had: a tool that lets them use their own energy and talents to lift themselves out of poverty. You can give them savings.

And when poor families can save for their future, their lives are forever changed. But not only their lives. Also their children’s lives, and their grandchildren’s, for generation after generation.

We are excited to be your partner.

Thank you.

November 16, 2010

Melinda French Gates, speaking at the 2010 Global Savings Forum in Seattle, Washington, talks about why it's important that the world's poor have access to savings accounts. Watch highlights from her speech.