Gates Fund to Spend $500-Million to Encourage Poor People Worldwide to Save

The Bill & Melinda Gates Foundation is committing $500-million over the next five years to programs that enable poor people in developing countries to save money, an approach to fighting poverty that the philanthropy says has received too little attention.

Melinda Gates announced the commitment today in Seattle at the Global Savings Forum, a conference sponsored by the foundation. “Savings doesn’t just help people mitigate the risks posed by a medical emergency or a bad crop,” Ms. Gates said in prepared remarks. “It also gives them the ability to marshal their resources to build something better for their children.”

The Gates fund has been narrowing its focus on savings programs since it began supporting financial services for the poor in 2006. Its officials felt that savings services, even more than small loans, were in high demand and needed the kind of flexible capital that philanthropy can provide, says Bob Christen, who leads the Seattle foundation’s grants to expand financial services.

“Some of our early grants to banks in Africa found that more than five and as many as 12 people coming in asked to open a deposit account for every one who wanted a microloan,” says Mr. Christen.

Deploying Cellphones

With the new money, the foundation seeks to find ways to reduce costs associated with savings programs for the poor. One promising strategy is a service in Kenya that allows people to deposit money with the same agents who sell airtime minutes for cellphones and then send money via their phones to family members or to pay bills.

Such projects will receive about three-quarters of the Gates support. The rest will go to efforts to educate lawmakers and influence policy, and for research and evaluation. To date, the Gates foundation has spent about $500-million on financial services, about half of which has gone to the savings program, Mr. Christen says.

David Roodman, a senior fellow at the Center for Global Development, a think tank in Washington, says that while savings programs haven’t been ignored by other donors, they haven’t received the same attention as small loans. He says the Gates foundation has been successful in encouraging large microfinance nonprofits, such as Finca, Grameen Foundation, and Opportunity International, to focus more on savings.

“They are changing the narrative from one purely about credit to one that’s more diverse,” he says. “That’s a good thing.”