Planned Savings in Latin America and the Caribbean

Xavier Martin

The boundaries of the concept of planned savings, also known as programmed or contractual savings, are vague. However, evidence has demonstrated that certain savings product models can help people reach a higher level of commitment in their willingness to save1. Therefore, a better understanding of the different planned savings models targeting the low-income population of Latin America and the Caribbean, is essential for evaluating the benefits and limitations of these kinds of products; and thus, for designing policies that increase savings mobilization amongst this segment of the population.

In Latin America and the Caribbean there are over 2.000 financial institutions regulated by the central banks or banking superintendencies that are authorized to capture deposits. These include public and private banks, credit unions, savings banks, and over 30 different typologies of financial entities authorized to capture and promote savings amongst the population. Furthermore, there are over 3.000 credit unions that capture savings with little to no prudential regulation. Many of these entities promote savings through a wide array of product offerings. Beyond traditional savings accounts and fixed-term deposits, there is a series of products that incorporate different mechanisms that help clients save frequently by offering incentives and restricting the use of funds according to previously established terms.

The ProSavings Program, led by the Multilateral Investment Fund, is interested in better understanding the reality of planned savings in the region, in order to identify success stories that can serve to support strategies and policies to foster the practice of savings. With this objective in mind, we have launched an ambitious research study2 that seeks to analyze the planned savings products offering available in 26 countries of the region3. Distinguishing amongst the products of over 5.000 financial institutions - in order to establish a planned savings typology - is not an easy task. Despite this challenge, we believe this is a worthy effort that can shed light on the optimal characteristics that planned savings products ought to have in order to successfully reach the low-income population.

*Translated from its original Spanish version by Avril Perez of the ProSavings team

1 The work of Professor Dean Karlan and Abdul Latif Jameel from the Poverty Action Lab in the realm of behavioral economics are especially relevant given that it conveys, through randomized evaluations, that certain financial product design characteristics can be effective in incentivizing savings amongst low-income populations.

2 This study will be published during the first trimester of 2013.

3 The countries featured in the study are: Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Suriname, Trinidad y Tobago, Uruguay, and Venezuela.

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