Development Groups Tout ‘Microsaving’ as Tool to Help Poor

Amid concerns about the negative impact of microlending for many poor borrowers, some development charities and financial institutions are backing efforts to promote savings rather than credit as way up the economic ladder for people in developing countries, The Washington Post reports.

The concept of “microsaving,” even at the level of just pennies a day, is gaining traction as organizations that championed microfinance watch many borrowers get trapped on a debt treadmill, especially as microlending became increasingly profit-based during the economic downturn. The Bill & Melinda Gates Foundation has invested $500-million in microsaving programs.

“There’s a common, misguided, knee-jerk reaction that if you’re poor, you have no assets to save,” said Dean Karlan, a Yale economist and head of the nonprofit group Innovations for Poverty Action. “People who are poor obviously save less, but they still save.”