MasterCard Foundation Aims to Make an Old School Savings Plan New Again

The MasterCard Foundation has been working double overtime lately to get the world’s poor populations hooked in to formal financial systems. Though the foundation has launched financial inclusion projects in Asia and Latin America, Africa remains a priority geographic area of focus for the foundation—and an ever-expanding one at that.

The MasterCard Foundation has partnered with Oxford Policy Management to launch the $17.6 million Savings Frontier Initiative. The collaborative plans to run the initiative for six years, aiming to connect some 250,000 people living in rural Ghana, Tanzania, and Zambia with formal banking systems. The project is said to take a unique approach to financial inclusion in that it is designing new financial products custom made for informal savings groups.

Related: MasterCard Foundation’s New Prize to Help the Poor Connect to the Financial Mainstream

At the announcement of the Savings Frontier initiative, Ann Miles, director of financial inclusion and youth livelihoods at The MasterCard Foundation, highlights Global Findex’s findings noting that “making the connection between these informal savings groups and the formal banking system is one of the three most promising opportunities for financial inclusion.”

Informal savings groups are basically old-school finance clubs in which participants pool their money. Over a period of time, each participant can take out a credit—usually based on a percentage of what they deposit—and are allowed to pay it back to the group over time. Communities in developing countries have been kicking around informal savings groups for hundreds of years. And while anyone can participate in the groups, they are typically composed of women.

Oxford Policy Management will commission a research project involving the development of scalable and sustainable business models pertaining to informal savings groups over the six-year course of the Savings Frontier Initiative. Upon the completion of the project, Oxford’s findings will be shared with the international development community and the financial industry. This will hopefully foster innovative projects designed to appeal to a broader base of financially excluded populations and thereby increase financial inclusion levels around the world.

The MasterCard Foundation has been fostering financial inclusion in developing countries for some time now, with much of that work focusing on access to financial services and products like basic savings accounts and lines of credit. The Savings Frontier Initiative is the first time the foundation has tapped into the widely untouched potential of informal savings groups, and it isn’t the only outfit that’s doing so.

Earlier this year, JP Morgan Chase partnered with Plan International to launch their Community Savings Groups (CSG) project in the Eastern Samar region of the Philippines. The joint effort aims to set up at least 90 savings groups in the area, 60 of which will be funded by the JP Morgan Chase Foundation.

Related: A Bank Gets Behind an Old School Savings Plan to Spur Rebuilding in the Philippines