Originally posted on our AppLab Blog.
Fredrick Ndiwalana is Relationship Manager, Applab Money Accelerator, and Ali Ndiwalana is Research Lead, AppLab Money Incubator, at Grameen Foundation Uganda.
There is consensus that the poor (those living on less than $2.50 per day) need the same kind of financial services as their more affluent counterparts, albeit in smaller affordable units. What is not clear – especially in markets where formal financial exclusion is high and innovation is low – is whether financial institutions can design pro-poor financial products. After all, this is an area where they have not done so well for the so-called rich, despite years of experience. East Africa is such a market.
In Uganda, where Grameen Foundation’s Applab Money Accelerator is located, financial institutions continue to offer savings products for which the interest earned by the customer is much lower than the rate of inflation. This is something that the average ”financially included” savings account holder has become accustomed to, and financial institutions have always found a reasonable way to justify it such as a low bank rate as well as high operational costs. Though such explanations may be acceptable to the economically schooled, they seem to defy logic when it comes to explaining them to the less schooled.