>> Learn: How savings and retail banks serve during pandemic
>> See: ESBG statement on Covid-19
>> Read: WSBI statement on Covid-19
BRUSSELS, 3 April 2020 – Little debate swirls around the potent force savings provide economies. At national level, savings enable governments to leverage a set of tools that address growth, longer-term development goals as well as financial stability.
Thankfully, savings also help people withstand shocks like those from Covid-19. Savings provide a needed lifeline for people, communities and nations. Individuals, enterprises and governments without enough savings surplus face financial pressure when economic activities are disrupted. Low national savings can limit governments’ capacity in response to external shocks. High debt ratios of individuals, enterprises and governments can lead to bankruptcy and sovereign crisis. The Covid-19 outbreak proves this.
A highly personal act, savings increasingly occurs on the digital front. Despite great effort to connect more people to mobile apps and online portals, more must be done.. Emerging digital financial service players make it easier for people to make payments and borrow money. Relatedly, digital financial inclusion widens, but should not be seen, however, from a purely payment and credit perspective. One must stay clear from “mission drift” when widening digital financial inclusion and avoid consumers over-indebtedness. When digital inclusion works and people of all ages and situations feel empowered through savings, then society and economies can weather storms like Covid-19. That’s when thousands of WSBI member savings and retail banks around the globe can really step in and play their role: channelling household and corporate savings into projects that nourish regional economies, projects to build roads, financing for jobs-creating small, medium and large businesses and a forging a green future.
Challenges in developed, developing countries alike
Beyond Covid-19 and narrowing digital divides, the world’s aging population brings new challenges, whereby sole reliance on state pensions no longer works on its own. In developed economies, rapidly greying age brackets create a struggle for governments and people to navigate through this demographic quandary. Developing countries find lots of people falling through the cracks, left behind in compulsory pension schemes. Farmers, microentrepreneurs and low-skilled labourers get hit most. With cards stacked against the many, citizens need to take up responsibility when it comes to their future retirement. Encouraging pension savings through tax incentives may help. Tax codes need a rethink too. People face complex incentives schemes in local tax rules, which prevent people from fully grasping the benefits. To address this, national financial education programmes should step in. Other measures can help, such as auto savings enrolment – a technique out of the behaviour science playbook – to prevent people from spending their entire incomes.
Empowering people through savings
Locally focused savings and focused retail banks understand the power of savings. They help empower people to save by providing a wide range of savings tools and raising financial literacy levels within a population. That story gets shared at global level by WSBI, an organisation that represents thousands of like-mined banks in some 80 countries. Through its outreach, WSBI encourages the G20 to act on this front by launching a global-wide initiative to instil a savings culture. Doing so will address falling average national household savings rates – for instance in OECD countries – and stubbornly low savings rates in many other places post-financial crisis. The need remains for G20 leaders and implementing partners to support – and enable further – developing economies to build up the banking backbone required to better mobilise domestic savings. Countries where people can move swiftly from informal savings channels to formal banking will gain greatly.