PRODUCT CHARACTERISTICS - SAVINGS MABS, Chemonics International Inc.
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Transcript of PRODUCT CHARACTERISTICS - SAVINGS MABS, Chemonics International Inc.
PRODUCT CHARACTERISTICS -
SAVINGS
MABS, Chemonics International Inc.MABS, Chemonics International Inc.
Overview
• How do people save?
• Why do people save?
• Types of savings products
• Strategies to implement a new savings service
How Do People Save?
• Non-Monetary Form– jewelry– livestock– inventory– land– house– durable items
• Monetary Form– cash– passbook
savings– time deposit– bubo-ay
Why do people save?
• Retirement/better life - wealth accumulation• Emergency needs - illness, disability, death• Everyday needs - school fees, food, utilities,
transportation, clothing, rent, house renovation, appliances
• Business opportunities- capital• Special occasions - fiestas, weddings
Problems associated with non-bank savings
• Cash - potential for theft, overspending, demands from family
• jewelry - theft, loss, difficulty of selling in an emergency
• livestock - theft, death of animal, difficult to sell in an emergency
• inventory - spoilage, theft, storage
• land & house - not easy to sell
• durable items - depreciation , theft
Bank savings - advantages
• Withdrawability - easy access
• Security - no problems of theft, insured
• Returns - interest income/investment
• Access to other services - loans
• Self-financing business capital & other needs - rather than paying 5 - 6ers
Designing savings products
• Market study• Client Friendly Products & Procedures• Objectives of the savings service - different
products for different needs• Pilot program• Analysis of pilot program & adjustments
Market Study
• Potential clients– wage earners– microenterprises
– small businesses • Needs/Motivations for
saving– education– investment – emergencies
• Competition
Client Friendly Products & Procedures
• Convenience
• Simple Procedures
• Less Restrictive
– low minimum balance
–low minimum maintaining balance
• Lessons learned from the Informal Sector
Objectives of the savings service
• Attractive to clients
• Maintain good relationship with clients - build trust
• Cost efficient for the institution & client - product should be analyzed in terms of costs to the client and bank
Different products for different needs
• Regular Savings Products
• Semi-Restricted Savings Products
• Time Deposits
Regular Savings
–Withdrawability (easy access) and service are the most important
–More useful for those who need ready access - business opportunities, emergencies
Regular Savings
+Generally more stable than larger accounts
- Administrative costs tend to be higher for smaller accounts and numerous transactions
Semi-restricted accounts
–Convenience and level of service
–Attractive for those used to the Bubo-ay or who save for particular purposes: education
Semi-restricted accounts
+Generally attracts larger savings balances than regular savings
- The product is simple for clients to understand but can be more complicated to set-up and monitor
Time deposits–Return or interest rate is most
important
–Generally attractive for those with longer-term horizons: retirement, purchase of land, or house
Time deposits
+Administrative costs are lowest of all three products and they are easier to manage
- Financial costs are much higher- Accounts are more difficult to
attract (competition)- Risk of ‘hot money’
Designing Regular Savings
• Access is the most important– hours of service– number of tellers (dedicated to savers)– deposit collectors
• Trademark is important to distinguish the product from others - ‘Ganansya Box’, ‘Happy Future Savers,’ ‘Grow Every Day’
• Scaled interest rates for higher balances• Operations and Procedures manual
Designing Semi-Restricted Accounts
• Easy to understand products• If regular contributions are required, there is
the need for dedicated tellers/collectors• Trademark is important - ‘Partner Savings
Plan’, ‘Save for Christmas’, ‘Save for School’
• Changes to MIS to facilitate more transactions
• Operations and Procedures Manual
Designing Time Deposits
• Interest rate is key - need to monitor the competition
• Client’s generally have more banking experience
• Need to be flexible and adjust interest rates regularly
• Operations and Procedures Manual
Pilot Program
• Selection of pilot branch close to main branch
• Committee to coordinate, monitor, and adjust the product
• Implementation plan
Implementation plan
–Product and administrative systems
–Procedure manual, internal control, audit, monitoring and evaluation
–Changes to MIS
–Projections
–Training of personnel
–Monitoring and Evaluation System
Analysis of pilot program
• Objectives of the pilot program– Test products– Evaluate demand– Learn about the market place– Establish and adapt accounting
procedures, MIS, communication system, audit system, and internal controls
– Analyze costs of the instrument
Analysis of pilot program
• Objectives of the pilot program– Establish the margin between savings and
loans - proper returns– Evaluate the cost effectiveness of different
types of promotions - raffle for cash vs. appliances
– Evaluate infrastructure– Evaluate the efficiency of service– Adjust the training program for personnel
Analysis of pilot program
• System of Monitoring and Evaluation– Compare actual figures against
projections– Structure of deposits– Evaluate administrative and financial
costs– Reaction of clients to different products,
promotions, and interest rates– Evaluate the efficiency of service
Analysis of pilot program
• Service Efficiency
– Time to open, deposit, and close accounts
– Number of transactions per day
– Average amount of each transaction
– Number of transactions by type & size of account
– Time that clients waste in line