Miller Center Fellowship


Amanda Nelson

Document Type

Research Report

Publication Date



Along with lack of access to credit, lack of access to savings for the poor is considered a major barrier to economic development (Donnelly, 2). Credit services offered by microfinance organizations have assisted many poor women in improving their financial situation. However, many microfinance organizations lack formal savings products for the poor women they serve, specifically women’s committees.

While spending the summer at Fundación Paraguaya, I was floored by the progress that the women were making through the use of their loans. But borrowing is typically riskier than saving, and reliance on loans can lead to over-indebtedness. A focus on debt rather than saving can contribute to a cycle of debt and poverty. While saving requires current sacrifice and delayed gratification, it offers increased flexibility. And while borrowers must pay interest, savers earn it (Vonderlack and Schreiner, 603).

Savings offers financial opportunities that credit cannot, and avoids some of the traps that over-reliance on credit falls into. Accumulated savings can buffer spikes in expected household expenses due to life events like childbirth, school feeds, or religious events as well as unexpected expenses such as natural disasters or widowhood. These accumulated savings also gives the poor the capacity to take advantage of unexpected investment opportunities that may lead to increasing returns in the future (Vonderlack and Schreiner, 603). Fundación Paraguaya, like many other institutions, lacks significant savings products to balance their lending. Only by combining both the saving side with credit, can financial inclusion truly be reached.

There has been an ideological frame shift within the development world from microcredit to microfinance and now to financial inclusion that recognizes that savings products, not just loans, are a key component to assisting the poor, particularly women. And while microfinance is typically targeting towards women, the design of products rarely addresses gender-specific aspects if the use of these financial services (602). In order to move forward towards financial inclusion, effective savings products that take into account women’s economic behavior need to be implemented in the marketplace.



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