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

Country governments and the international development community were quick to provide rescue and recovery support areas in the destructive wake of Typhoon Haiyan. Two years after the super-typhoon leveled parts of the Philippines, the recovery of its people has been a slow, but not all that steady march. While it's estimated that around four million people have returned to their homes, very little information is available about how these people and their communities are progressing in their post-Haiyan rebuilding and recovery efforts.

The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) has estimated that Haiyan either disrupted or destroyed the livelihoods of some 6 million people, of which 40 percent are female and 20 percent are young people. The inability of both groups, which were underserved and marginalized prior to Haiyan, to earn a living does not bode well for long-term recovery efforts. And if earning money is hard, saving and investing money in rebuilding projects is even harder. 

To encourage savings toward spurring reconstruction, JP Morgan Chase has stepped in with an old-school savings solution for marginalized groups and highly affected communities living in the Eastern Samar region of the Philippines: informal savings pools.

JP Morgan Chase is joining up with Plan International to launch a Community Savings Groups (CSG) project for seven communities in the Eastern Samar region. The CSG project is aiming to set up at least 90 savings groups in the area, 60 of which will be funded by the JP Morgan Chase Foundation.

CSGs are basically old-school microfinance vehicles. Participants pool their savings for a period of time—in this case, it’s three to five weeks. After putting in for around a month, participants can take credit of up to three to five times the amount of their savings. They are allowed up to three months to pay back their credit. Chase and Plan International are expecting to launch a pilot project at the end of this year that is set to run until early 2016.

Informal savings pools have been around for centuries, and according to Paul Breloff, managing director of Accion Venture Lab, they “are arguably one of the oldest and most widely used financial tools in history.” Some, especially those in the finance world, may think that such informal savings pools don’t do much to increase savings rates because participants aren’t incentivized with things like earned interest. However, a study conducted by the National Bureau of Economic Research indicated that there wasn’t a strong correlation between high interest and saving money.