Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Himanshi Jain Wendy Cunningham © 2023 International Bank for Reconstruction and Development/The World Bank. 1818 H Street NW, Washington, DC 20433, USA. Telephone: 202–473–1000; Internet: www.worldbank.org. Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202–522–2625; e-mail: pubrights@ worldbank.org. Cover and text images: World Bank photo collection, https://www.flickr.com/people/worldbank/. Contents Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Section 1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The data, key findings, and report organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2. Answers from the ‘Liberia Saving Needs and Aspiration’ Survey . . . . . . . . . . . . . . . . . . . . . . 11 I. Poor households in the urban informal sector save, but there is heterogeneity in savings behavior . . . . . . . . . . . . . 11 II. Vulnerable urban Liberians deliberately save to meet household human capital needs and for asset creation. . . . 15 III. Susus are common but not the only or the most consistent way for the poor urban informal to save . . . . . . . . 20 IV. All existing saving modes exhibit some barriers but there are silver linings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 V. Poor urban informal sector Liberians would like savings mechanisms to be digital, group-oriented and include savings incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3. Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings . . . . . 35 Liberia’s financial landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Digital financial landscape of Liberia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Potential of a bank-led m-savings model for the urban informal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Readiness of a telco-led model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Readiness of a hybrid model—banks and telco led . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 4. Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Recommendation 1: Support viable susus to sustain and scale themselves by documenting them and leveraging digital technology to connect them to the financial ecosystem. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Recommendation 2: Improve the target population’s financial literacy and inclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Recommendation 3: Continue investments in foundational systems, including expanding ID coverage, improving payment systems, and building interoperability between social protection programs and saving schemes.. . . . . . . 52 Recommendation 4: Clarify policy so that the private sector and civil society can effectively partner in meeting the informal sector’s saving needs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Recommendation 5: Pilot a digital-based saving scheme based on findings from LSNA and evaluate the scheme to finetune design, delivery, and incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57  n  iii Boxes Box 1: Characteristics influencing demand for saving—findings from the literature .................................................................................................14 Box 2: Why people save and the influence of perceptions on saving behavior...........................................................................................................17 Box 3: Informal savings mechanisms in Sub-Saharan Africa (and beyond).......................................................................................................................20 Box 4: Voices of two Liberian susu club members .....................................................................................................................................................................21 Box 5: Why IDs and payments are foundational blocks for success of micro-saving schemes.............................................................................36 Box 6: Literature’s findings on digital savings.................................................................................................................................................................................39 Figures Figure 1: Employment distribution by area, ages 15-64................................................................................................................................................................. 2 Figure 2: Distribution of household head age................................................................................................................................................................................. 6 Figure 3: Distribution of household size among survey respondents.................................................................................................................................. 7 Figure 4: Employment status of LSNA survey respondents...................................................................................................................................................... 7 Figure 5: Main household Income source of survey respondents......................................................................................................................................... 7 Figure 6: Average monthly hh income by income source..........................................................................................................................................................8 Figure 7: Reported predictability of respondent’s income........................................................................................................................................................8 Figure 8: Share of savers over time......................................................................................................................................................................................................12 Figure 9: Who savers save with..............................................................................................................................................................................................................12 Figure 10: Frequency of saving among those who save..............................................................................................................................................................12 Figure 11: Monthly household savings among savers (N=559)..................................................................................................................................................13 Figure 12: Monthly household (all incomes) (N=1000)..................................................................................................................................................................13 Figure 13: Current goals/plans for saving...........................................................................................................................................................................................16 Figure 14: Purpose of saving through susu........................................................................................................................................................................................16 Figure 15: Borrowing methods among the poorest 40 percent..............................................................................................................................................17 Figure 16: Source used to finance their household enterprise start-up, %.......................................................................................................................18 Figure 17: Frequency with which personal savings is used for household business, %................................................................................................18 Figure 18: Strategy to handle household expenses if a shock should occur, %..............................................................................................................19 Figure 19: Time that savers can keep savings without spending half of it, %...................................................................................................................19 Figure 20: Time that they can use savings to cover expenses without borrowing, %.................................................................................................19 Figure 21: Places where informal urban Liberians keep their savings....................................................................................................................................21 Figure 22: Regularity with which payments are made to susu group, %...........................................................................................................................22 Figure 23: Frequency of cash out from susu group, %...............................................................................................................................................................22 Figure 24: Regularity of susu meetings..............................................................................................................................................................................................23 Figure 25: Where does your susu keep its money?.....................................................................................................................................................................23 Figure 26: Reasons for not having a personal bank account...................................................................................................................................................23 Figure 27: Frequency of use of mobile money, %........................................................................................................................................................................24 Figure 28: Share of respondents who have an active account in the indicated institution....................................................................................24 Figure 29: Distance to the nearest bank branch (panel a), susu deposit place (panel b), mobile money cash out point (panel c).......25 Figure 30: Ease in accessing saved funds..........................................................................................................................................................................................26 Figure 31: Degree to which the respondent would recommend each type of savings institution to a friend (Rank 1: not at all; Rank 4: highly recommend) ...................................................................................................................................................................................................................26 Figure 32: Degree of trust in alternative savings mechanisms................................................................................................................................................27 Figure 33: Preferred characteristics of formal saving methods..............................................................................................................................................28 Figure 34: Preference of linking mobile money account to group savings (left) and individual savings (right)................................................31 Figure 35: Reasons why group saving is preferred to formal savings.................................................................................................................................. 32 Figure 36: Would you or your household be willing to save more or more often in case of................................................................................ 33 Figure 37: Innovative mediums by banks to engage with customers: Call center of Access Bank and USSD focus of EcoBank............41 Figure 38: Payment using EcoBank’s mobile app...........................................................................................................................................................................42 Figure 39: Orange and Lonestar (MTN) MoMo booths in Liberia........................................................................................................................................45 Figure 40: Social protection instruments across the income spectrum............................................................................................................................53 Tables Table 1: Sample size by community and gender............................................................................................................................................................................. 5 Table 2: Constraints and benefits of various saving modes ..................................................................................................................................................30 Table 3: Pros and cons of different institutional models for a m-saving scheme........................................................................................................48 iv  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Abbreviations BRI Bank Rakyat Indonesia CBL Central Bank of Liberia CDS Centre for Development Studies CU Credit union FIU Financial Intelligence Unit GC Great Commission GOL Government of Liberia HEIS Household Income and Expenditure Survey HH Household HSPS Hybrid Social Protection Scheme ICT Information and communication technology IT Information technology KYC Know Your Customer LMNA Labor market needs assessment LSNA Liberia Saving Needs and Aspiration Survey LTA Liberia Telecommunications Authority MIS Management Information System MTN Orange and Lonestar NFE Non-farm household enterprises NFIS National Financial Inclusion Strategy NIR National Identification Registry OS Old school PAPD Poor Agenda for Development POS Points of sale PSP Payment service providers ROSCA Rotating Savings and Credit Association SHG Self Help Groups SMSB Small and Medium Size Businesses SSA Sub-Saharan Africa USSD Unstructured Supplementary Service Data VSLA Village Saving and Loan Association WAEMU West African Economic and Monetary Union Abbreviations n  v Acknowledgements This report was prepared by the World Bank West Africa Social Protection and Jobs Global Practice in the Human Development Practice Group. The effort was led by Himanshi Jain and Wendy Cunningham. The report was prepared in close collaboration with the Liberia Social Protection & Jobs team. The team members include Himanshi Jain, Wendy Cunningham, Mack Capehart Mulbah, Fareeha Adil, Filippo Cuc- caro, McSwain Forkoh, and Sarah J Ward. Guidance at the concept note stage was provided by Victoria Strokova, Iffath Sharif, and Khwima Nthara. The team would like to thank the representatives from the Telcos (Lonestar MTN, Orange), Associations (Liberia Credit Union National Association, Cooperative Development Agency, Liberia Marketing Asso- ciation); Banks (EcoBank, Access Bank, LBDI), government agencies (Ministry of Small Business Administra- tion, Ministry of Gender and Social Protection, Ministry of Finance and Development, Central Bank of Liberia); and Civil Society (Mercy Corps, BRAC) in Liberia who participated in detailed consultation that provided valuable information and informed the research questions of the study. Our sincere thanks also to a total of six susus, Credit Unions, and VSLAs who participated in consultations. The team benefited from the excellent comments of the peer reviewers, Fiona Elizabeth Stewart, and Suleiman Namara. Mitja Del Bono, Sarika Gupta, Steisianasari Mileiva, and Erik Anders Jorgensen also provided thoughtful comments on the report and the survey questionnaire. The design and layout were done by Michael Alwan. Administrative and logistical support was provided by Jessica Venema, Lemu Ella Makain, and Charity Inonge Mbangweta. The report was produced under the overall guidance of Camilla Holmemo, Dhushyanth Raju, and Anne Tully. The team extends great appreciation to the Rapid Social Response Multi Donor Trust Fund donors (the governments of Australia, Norway, the Russian Federation, Sweden, and the United Kingdom, as well as the Bill and Melinda Gates Foundation) for the funding they provided and which made the preparation of this report possible. vi  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Executive Summary Gisela, a 40-year-old fruit seller in urban Monrovia, is one of 48 women in Blanco community who save in a group commonly accessible to informal sector workers in Liberia—susus.1 Her susu group is the ‘Women of Excellence susu club’ and is who she turns to in times of distress or when she needs a loan to invest in her business. The minimum mandatory weekly contribution or ‘value of a hand’ is LRD 3500 (~US$22). Members receive a lump sum payment from the susu once a week or once a month. In 2019, Gisela used her windfall amount of LRD 51,000 to purchase a hand-held cart, and she now sells her produce in different localities. Since COVID struck, fewer women have been able to pay their contribu- tions, and the susu group has shrunk. Gisela is not confident she can count on the susu group anymore to finance her dream of owning a store. Gisela is among the large and diverse group of informal sector workers in urban Liberia who lack social protection coverage, have little interaction with formal financial institutions, and depend on informal saving groups to meet their financial needs. The informal sector is estimated to comprise 84 percent of employed urban workers in Liberia, primarily single-owned non-farm household enterprises (NFE). This group is not the poorest of the poor, so they are rarely eligible for publicly financed social assistance programs. But they are not rich enough to buy into social insurance, which is, by design, only available to the few with a formal employment contract. Instead, Gisela and her colleagues must self- insure against idiosyncratic shocks—such as health emergencies, disability, and income loss due to old age or death—using their savings or by borrowing at high interest rates. These groups lack access to saving accounts, credit, or insurance via more formal financial institutions. Instead, the savings mecha- nism that they use to set aside money to meet contingency needs rarely pays interest and, over time, their savings lose value due to inflation. In short, these groups lack financial resilience against shocks which limit their ability to build better lives for themselves and their families. The financial vulnerability that this group faces not only puts their welfare at risk but also under‑ mines the economy at large. At the individual level, there is a risk of sub-optimal financial behavior, in- cluding inefficient management of business expenditures and profits, under-saving for risk management, and adoption of damaging coping strategies (e.g., reducing food consumption, selling productive assets, withdrawing children from school, foregoing medical care). While NFEs are the lifeblood of the Liberian economy, their poor resilience makes it harder for the economy to bounce back from shocks—CO- VID-19 being a case in point. The younger NFEs typically have lower savings or assets and are at a higher risk of shutting down after an economic shock. Unless they are supported, frequent business failures inhibit the transformation of these small enterprises into more stable and productive firms that could boost employment and aggregate economic output (World Bank, 2021). Despite the potential risks, there is little systematic information on how the urban informal poor in Liberia save, their saving aspirations, and what they need to save better. Anecdotal evidence suggests that susus—informal savings clubs that require regular contributions by members and lump sum pay- ments to members on a rotating basis—are common in Liberia. However, data on their prevalence and 1. Susu, prevalent in Liberia and Ghana, is a form of informal finance that resembles Asian counterparts like ‘Arisan’ in Indonesia and ‘Paluwagan’ in the Philippines Executive Summary n  vii perceived benefits and challenges are scarce. The lack of empirical evidence makes it difficult for policy- makers to assess whether the existing instruments are meeting the needs of workers and what oppor- tunities exist for realizing the unmet saving needs of this group. At a macro level, the unregulated and undocumented nature of informal saving groups further restricts the government’s ability to assess needs and support these groups during a crisis. This report explores the saving behavior and aspirations of urban informal households in Liberia by presenting the findings from a survey of 1000 households in Monrovia, supplemented by an assess‑ ment of Liberia’s existing informal savings institutions. The in-person survey included households/ respondents who received the emergency Urban Cash Transfer during COVID-19 in ten low-income communities in Monrovia. Household enterprises provide the primary source of income for 44.7 percent of all respondents, whereas 20 percent depend on salaries and 21.5 on wages.2 Seven key messages emerge from the study: Over half of Liberia’s urban poor and vulnerable save to meet short-term needs, invest in house- hold businesses, and build financial resilience. Sixty-six percent of survey respondents reported sav- ings, with a monthly average of US$35. The primary reasons for savings are to meet short-term produc- tive needs (like children’s education), purchase land, and meet household enterprise expenses. Sixty percent of respondents used personal savings to finance the setup of their enterprise. Savers displayed financial resilience, i.e., the ability to use savings to meet living expenses (without borrowing) when faced with an economic shock. Twenty-five percent of savers said they could keep their savings for up to a year without spending at least half of it, 40 percent could do so for 1-3 months, and 20 percent for less than a month. The profile of Liberian savers is similar to those in other low-income developing economies. De- mand for savings among vulnerable urban Liberians is positively correlated with being a woman, owning a household enterprise, being less poor, and having a predictable income. A 1 percent increase in a wealth index score is associated with a 4.4 percent increase in demand for savings. Controlling for wealth, an individual receiving income from household enterprises is 16 percent more likely to save than those who earn wages or salaries. Individuals with higher financial literacy and financial inclusion are more likely to save. Survey respondents with knowledge and awareness of financial products like saving accounts, credit, or insur- ance exhibited a higher propensity to save. An increase of 1 percent in the Financial Literacy Index is es- timated to increase the propensity to save by 3.6 percent. Similarly, those with higher financial inclusion (e.g., owning a bank, credit union, or susu account, using mobile money) are 2 percent more likely to save. Those who save are more likely to save in susu, though persistence in saving is a challenge. Saving in a formal financial institution is limited among survey respondents, with only 18 percent owning a bank 2. Salaries is defined as a fixed regular payment, typically paid on a monthly and wages are a fixed regular payment earned for work or services that is typically charged by the hour or the output. viii  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector account. The nationally representative Findex Database (2021)3 corroborates this finding, with 13 percent of Liberians aged 15+ reportedly saving at a financial institution. Informal (Rotating Savings and Credit Association—ROSCA, Village Saving and Loan Association—VSLA) and semi-formal saving groups (credit unions) exist in Liberia, but susus are the most used. Only 16 respondents (of 1000) reported having an active savings or credit account with a credit union (CU). Two-thirds of respondents saved with a susu at least once. However, only 37 percent were saving with a susu at the time of the survey, which could re- flect COVID’s impact on disposable incomes and the ability to continue making mandatory payments in a group saving scheme. Susus are accessible and generally liked, but respondents aspire to the flexibility and higher secu- rity that formal institutions offer. Sixty percent of respondents can reach their susu club within 10 minutes of walking. In contrast, 40 percent said they must take a bike/motorcycle to reach a bank. In addition to being highly accessible, susus are more likely to be recommended to friends. A reported 50 percent of respondents are ‘extremely likely’ to recommend susus, though 30 percent are ‘not at all likely.’ A much higher proportion of respondents are ‘not at all likely’ to recommend ROSCAs (63 percent), VS- LAs (78 percent), and credit unions (68 percent). Flexibility in the design elements (e.g., earlier access to funds through individual accounts, access to cheaper credit options for consistent savers, product bun- dling options that offer saving plus insurance) and security were reported as features in formal institu- tions that are preferred over informal saving groups. Mobile money account ownership significantly increases the propensity to save. A surprising yet encouraging finding is that the likelihood of saving is considerably higher (31 percent) if one has a mobile money account. Alternatively, if the individual had deposits in a bank account, the propensity to save is only 21 percent higher than those without a bank account. Consultations with the Central Bank, Micro Financial Institutions (MFIs), and Telcos4 speculated that the cash liquidity crunch in the economy might be contributing to the attractiveness of mobile money among the informal sectors. Respondents expressed a preference to save (or save more) if monetary incentives, mobile money, and commitment features are part of the design of the saving scheme. The survey was novel in its approach to requesting individual preferences for saving in group vs. individual methods, using digital means to save, and their likelihood to save in case of incentives offered. Respondents exhibit a positive and statistically significant preference for group savings, monetary incentives (e.g., interest on savings, matching contributions, grocery discounts, insurance), and using a mobile money wallet to save. The findings from this survey, supplemented by consultations and lessons from other countries, suggest that policymakers in Libera can improve the resilience of the urban vulnerable informal sector by strengthening existing saving methods and exploring new saving designs and stakeholder partnerships to meet this group’s growing aspirations and unmet needs. Five policy recommendations emerge: 3. https://www.worldbank.org/en/publication/globalfindex. 4. Telcos, a shorthand term for telephone company, refers to provider of telecommunications services, such as telephony and data communications. In Liberia the prominent Telcos (in terms of market share) are MTN Lonestar and Orange with MTN market share in the majority. Executive Summary n  ix First, collect more data on susus, and support viable susus to sustain and scale themselves by lever‑ aging digital technology and embedding them in the financial ecosystem. The survey and consulta- tions confirmed that no other informal saving group, semi-formal (CUs), or formal (bank) institutions enjoy the prevalence of susus. The work under this study also pointed to the surprising paucity of re- search, databases, or legislative arrangements governing susus. At the organizational level, susus and even CUs lack adequate MIS support to maintain records of savings and loans. This contributes to the lack of information on their prevalence, effectiveness, and impact. Efforts should be made to collect data on susus using innovative approaches, e.g., offering incentives like easy access to loans like done in India with agricultural workers. Policy makers should note the rapid rise in mobile money penetration and explore how digital technology can help scale up grassroots groups (including susus). Accounting and digital train- ing to susus could help them better manage and digitize their records. The viable ones could register their susus with MFIs or smaller banks (e.g., Access Bank, EcoBank), thereby linking formal and informal saving platforms. This strategy could be a win-win if the objectives behind the linkage are clearly understood. Second, invest in improving the target population’s financial literacy and inclusion. Survey results point to financial literacy and inclusion’s positive and significant impact on the demand to save. Given limited government resources, it will be necessary to tailor financial literacy training to include elements that have demonstrated significant impacts in similar contexts, such as in Bangladesh, where financial dia- ries provided to women had the same impact as financial education training but at half the cost (Islam et al. 2021). In Ethiopia, incorporating financial heuristics in training for rural populations and piloting mobile phone-based training have also shown a positive impact.5 The private sector, civil society, and international institutions also have a role in raising financial awareness through their programs and inter- ventions. Saving demand is also highly correlated with mobile money usage, and its adoption should be encouraged at the policy and program levels. Notable among these efforts were the digital payments to all safety net beneficiaries under the emergency Social Cash Transfer program during COVID-19. Third, continue investments in foundational systems, including expanding ID coverage, improving payment systems, and building interoperability between social protection programs and saving schemes. Informal sector workers have low and irregular incomes, so the viability of saving schemes targeted at these workers depends on their ability to reach economies of scale. Government invest- ments in foundational systems will reduce operating costs for existing and new schemes by allowing semi-formal and informal institutions (like susus, CUs, and MFIs) to access a central Management Informa- tion System (MIS), pool administrative resources, and avoid errors. Transparency, accessibility, and trust in saving schemes would also improve. It would also enable the government of Liberia to receive real- time data on the saving behavior of the informal economy and channel resources to those in need during an economic shock. Simultaneous investments in foundational systems and interoperability between social protection programs (like safety nets, employment services, and public works) and saving schemes can build and protect the financial resilience of poor and vulnerable households, allowing them a con- tinuum of protection. 5. This is part of the intervention of the “Design in Action” series by the World Bank’s Africa Gender Innovation Lab and ideas42. x  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Fourth, clarify policy for the private sector, civil society, and institutions to innovate and offer schemes that meet the needs of the informal sector. The National Financial Inclusion Strategy (2020– 2024) has a bold vision to “build a sustainable financial sector deeply rooted in digital financial services to provide access to and enhance the usage of a wide range of affordable financial services.” Achieving this vision will require partnership with the private sector and designing schemes that meet the needs of the informal sector. While savings via mobile money shows promise, regulations need to be clarified. Stakeholder consultations with regulators, the private sector, and civil society should debate the pros and cons of alternative saving instruments and learn from other African countries (Kenya, Uganda, Nige- ria, Rwanda) that have successfully navigated policy roadblocks. Lastly, pilot a digital-based saving scheme based on findings from LSNA and evaluate the scheme with the intent to fine tune design, delivery, and incentives. The survey results point to a diversity in the ability to save, a desire for flexibility in access to savings, and a preference for monetary incentives and digital saving. A voluntary micro-savings scheme that offers matching government contributions to incentivize savings, leverages digital innovation, and is built on a sound institutional framework can be part of Liberia’s flexible social protection tools. These design elements form the basis of pilots under Pakistan’s Hybrid Social Protection Scheme (HSPS) and Kenya’s Haba Haba scheme.6 The design modali- ties of these schemes differ by country depending on what already exists, the unmet needs, and institu- tions’ readiness. A pilot in Liberia would give a better understanding of the effectiveness of different design features (e.g., interest rate, incentives), identify operational challenges (e.g., use, access, and trust issues with digital saving; challenges with registration), and explore partnerships (e.g., with telcos, existing susu clubs). 6. In Pakistan the HSPS is designed to be a short-term saving option with government matching is offered to graduating safety net women beneficiaries. In Kenya, the Haba Haba scheme offers short- and long-term saving options to informal sector workers along with health insurance (through NHIF) and data packs (in partnership with Safaricom) as incentives. Executive Summary n  xi SECTION 1 Introduction Liberia is a low-income country with an economy and institutions that are still growing out of the devastation of civil wars at the turn of the twenty-first century. With a gross national income per capita of US$600 (in 2018), Liberia is among the 10 poorest countries in the world. Fifty-one percent of the population was below the national poverty line in 2016 (71.6 in rural areas; 31.5 percent in urban cen- ters). One-third of Liberia’s population is younger than 25 years old, most of whom will enter the labor force in the coming years. Limited opportunities for formal sector employment have driven large num- bers of people to self-employment in agriculture or unregistered non-farm enterprises (NFE). At the same time, social institutions (offering government programs) and economic institutions (including a fi- nancial system) are still emerging. According to the Government of Liberia’s Pro-Poor Agenda for Devel- opment (PAPD), the country needs interventions to “raise the aspirations of the poor, improve human capital, provide some form of income security, and raise savings levels” (Republic of Liberia 2018). Most Liberians work in the informal sector, which is likely to be the dominant employment sector for many years, and there are signs of urbanization of employment. Data from the Household Income and Expenditure Survey (HEIS) show that labor force participation rates in Liberia have increased from 69.1 percent in 2007 to 75.3 percent in 2016, and most Liberians depend on jobs in the informal sector (HIES, 2016).1 A higher share of youth (ages 15–24) and women work in the informal sector than non-youth (ages 25–64) and men. Estimates suggest that informality is lower in urban than rural areas but still reaches 84 percent of total employment in the former (HIES, 2016). Much of the current and future labor force is expected to continue working in the informal sector, given the low growth rate in formal sector jobs vis-à-vis population growth. Data from HIES (2016) shows that three out of four workers in Liberia were self-employed (in either agriculture or non-agricultural activities), and only 20 percent of workers had access to wage employment. Over time, though, employment has shifted out of agriculture and into non-agricultural activities, reflecting an ‘urbanization of employment,’ especially among the youth in urban areas (Figure 1). 1. The Household Income and Expenditure Survey (HIES) survey does not ask about formality or informality status. Instead, we define a worker as “formal” is he or she reports: (a) Waged employment in the public sector; (b) Waged employment in the private sector and having a labor contract; and (c) Owning (self-employed or employer) a registered NFEs. A worker is, thus, informal, if she or he reports (a) Waged employment in the private sector but not having a labor contract, (b) unpaid market-based work, and (c) self- employment or employers in a non-registered firm. https://www.ilo.org/surveyLib/index.php/catalog/HIES/. Section 1: Introduction n  1 FIGURE 1: Employment distribution by area, ages 15–64 100 80 47 45 55 60 75 Percent 40 55 53 20 45 25 0 2007 2010 2014 2016 Source: World Bank (2021). Urban Liberians account for 53 percent of the population, and while they have lower poverty rates and higher digital access than the rural population, they remain vulnerable. The share of the popula- tion in urban areas is higher than its neighboring countries of Sierra Leone (43 percent) and Guinea (37 percent). The population of Monrovia increased from 80,000 in the early 1960s to 1,678,000 in 2023, owing to rising birth rates, but also rural-to-urban migration partly driven by economic factors and partly by the civil wars during which Monrovia was under the control of peacekeeping forces and considered a safer place by rural Liberians.2 Urban Monrovia boasts better physical infrastructure (roads, electricity, etc.) and IT infrastructure than the rest of the country (Wilkins, 2021). Still, the rapid population growth has out- paced the development of infrastructure and social services, leaving poorer neighborhoods in slum-like conditions. Estimates using the 2014 HIES survey found that poverty was higher in rural areas (70 percent) compared to urban (43 percent), but the larger share of the population living in urban areas meant a roughly equal number of urban poor as rural poor. Poor and vulnerable3 households in urban Monrovia depend on earnings from informal non-farm household enterprises (NFEs). Two-thirds (65.3 percent) of vulnerable urban households own NFEs. These enterprises tend to be small (on average, two working-age persons) and have low earnings, making about US$23 per month per capita in profits. Virtually all of them are informal; only 1 percent are officially registered, and youth working in unpaid employment are most likely to contribute to these enterprises (World Bank, 2021). The NFEs in urban Liberia are vulnerable to economic contraction because they do not have alternative sources of income and can quickly be impacted by a shock (e.g., medical expense, death in the family, drought/pandemics) or a loss in demand for their business. The lack of public safety nets and sustainable risk mitigation strategies has led the urban informal poor to depend on informal saving groups to meet their financial needs. Social Assistance coverage in Liberia extends to only 12.7 percent of Liberians, and only 0.5 percent are covered under social insur- ance. A small share of Liberians, only 13 percent above age 15, saved at a financial institution, according 2. https://eros.usgs.gov/westafrica/case-study/urban-growth-liberias-only-metropolis-monrovia. 3. Vulnerable households are defined as those whose consumption levels fall in the three bottom consumption quintiles of the population. 2  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector to the 2019 Findex data. In the absence of public safety nets and adequate savings in formal financial institutions, the urban informal sector depends on social networks and informal mechanisms to meet their needs, such as financing children’s education or money for starting a household enterprise. A priori, the prevalence of informal saving groups (especially susus) suggests they have an essential role in informal sector households’ lives and human capital development. However, it is unclear if saving groups meet the diverse needs of the informal sector or if they are best suited for the same. The COVID-19 pandemic further spotlighted the vulnerabilities of urban informal sector workers. It has necessitated a rethink on building resilience and unlocking opportunities for this group for bet‑ ter livelihoods and human capital development. Most urban informal workers rely on daily economic activities such as street selling and other casual labor to meet ends. The imposition of curfews and social distancing impacted their lives and livelihoods. Small informal enterprises were classified as nonessential entities by the government during the early stages of the pandemic and were hard hit by revenue loss from prolonged closure. The pandemic risked forcing such firms out of business because of no access to formal credit or to a public or private safety net. Given limited fiscal space and the sustained economic downturn preceding the COVID-19 shock, the government has yet to build institutions to provide sub- stantive support to the informal sector. Formal and semi-formal financial institutions (banks, credit unions, MFIs) have failed to reach or attract this group because of the distinct characteristics of the in- formal sector, namely low and irregular incomes, high need for liquidity, and limited geographic and ad- ministrative traceability. The policy vision laid out in the Government’s PAPD report, advances being made in mobile money penetration, and an urgency to ‘build back better’ post-COVID opens opportuni- ties for urban Liberians in the informal sector that was unfathomable a decade earlier. Harnessing these opportunities will require understanding the barriers and untapped opportunities that prevent urban informal sector Liberians from saving (or saving more) efficiently. It will need to be accompanied by a readiness assessment of institutions, considering rapid technological advances, to understand the com- bination of design features, stakeholders, incentives, and policy support needed to create and support an ecosystem that promotes saving. An ecosystem that supports savings among the vast informal sector, notably the poor, can play a valuable shock-responsiveness role. First, it provides resources to fall back on and security to those most vulnerable to shocks, fraud, and theft. Second, even small savings, when efficiently mobilized at a large scale, can contribute to domestic resource mobilization over time. Third, an ecosystem that pro- motes savings and focuses on including the most vulnerable can be leveraged as a platform to channel financial support when a shock hits. An enabling institutional environment will allow such an ecosystem to be nurtured and become fi‑ nancially sustainable. The Liberian financial sector comprises an array of financial institutions: commer- cial banks, micro-finance banks, non-banking financial institutions, rural community financial institutions, credit unions, insurance companies, VSLAs, and mobile money operators. Similar to the experience of other Sub-Saharan African countries, mobile operations in Liberia are increasing, holding promise for citi- zens, especially in the informal sector. The digital financial landscape of Liberia is guided by the Central Bank of Liberia’s National Financial Inclusion Strategy (NFIS) 2020–2024 (CBL 2019b). The 2020–2024 NFIS explicitly focuses on advancing digital financial services, and also aims to bolster the regulatory frame- work in Liberia to enhance institutional and consumer capacity in achieving financial inclusion for all (CBL Section 1: Introduction n  3 2019b). By the end of 2023, Liberia aims to have made significant steps towards achieving a “stable, mod- ern, and competitive financial system that provides a supportive infrastructure and access to quality and affordable financial services” (CBL 2019b). In line with the vision laid out in the NFIS, Liberia has made progress in scaling up digital financial services, primarily in urban areas. The progress in the uptake of digital services is reflected in an in- crease in mobile money adoption, e-payments, and improved inter-mobile operators and banking sector connectivity. The volume of banking transactions increased 90 percent (CBL 2021: 85) from 2020 to 2021, likely due to the push-and-pull4 service, that is, the ability to easily transfer money between their mobile and bank accounts. Mobile money activities have become Liberia’s dominant digital financial services driver for the last five years. Digital tools—especially mobile technology—and complementary invest- ments in social protection systems can be used to make saving easy, accessible, and cost-effective. The need to support savings for the poor informal sector workers in Liberia is clear post-COVID and complemented by the government’s strategy to increase digital financial services; now is an oppor‑ tune time to discuss saving schemes for the poor and vulnerable urban informal sector in Liberia. The objective of this report is to inform such a discussion by providing empirical evidence on the (un) met demand for saving among the poor and vulnerable urban informal sector and explore existing insti- tutions’ readiness to take on critical functions to deliver accessible, convenient, and secure savings. It is motivated by five questions: i. Do poor households in Liberia’s urban informal sector save? ii. Why do these households save? iii. What modes of saving do these households use? iv. What are the key constraints and benefits of saving with existing formal and informal institutions? v. What design elements would attract this group to save (save more)? The findings from the report are intended to provide insight to Liberian policy makers and to the broader financial literature. The report’s empirical results aim to provide Liberian policy makers with recommendations on how to enhance the relevance of existing saving schemes and to support alternate saving designs so that informal sector workers are presented with a suite of options that align with their multiple and changing needs. The report also contributes to the financial inclusion literature by offering evidence on the saving needs, specifically of the poor living in African urban areas emerging out of fragil- ity, as opposed to more commonly used data sources (like Global Findex Data5) that collect data from the general population. Further, it is one of the few studies to systematically explore this population’s access to and use of mobile money.6 4. Push and Pull in mobile money refers to a service which aims to make making banking more accessible and convenient for users. It provides customers access to their bank account by linking it to their mobile money wallet. 5. The Global Findex database is a national representative definitive source of data on global access to financial services and includes data from Liberia in 2011, 2017, and 2021. The three rounds of Findex data on Liberia provide valuable insights into the saving, borrowing, account ownership, mobile money, and financial inclusion statistics for the overall population, the poorest 40 percent, and males and females. It is a comprehensive database; however, its focus is not on the poor and vulnerable, only. The broad focus and telephone interviews used for data collection provide limited and comparable (across different countries) questions to tease out the dynamics behind saving behavior and, more importantly, the aspirations of individuals. https://www.worldbank.org/en/publication/globalfindex. 6. The literature on savings and financial inclusion is rich and nuanced. Still, the number of studies in fragile or low-income contexts remains limited. Mobile money’s impact on saving behavior continues to be explored. 4  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector The data, key findings, and report organization The report’s conclusions are based on information gathered via stakeholder consultations, key in‑ formant interviews, a literature review, and the 2022 Liberia Saving Needs and Aspiration Survey or LSNA (2022). The LSNA (2022) is an in-person survey that was designed and implemented for the pur- poses of this study. It is an in-person hour-long survey and includes eight modules. The data collection was carried out from July–August 2022 under COVID-19 prevention protocols. Data quality was moni- tored using a standard protocol. We also use the Global Findex data set for benchmarking the LSNA (2022) results against a Liberia-wide sample and against other country experiences.7 The empirical analy- sis of the LSNA data is complemented by consultations carried out with public, private, and civil society actors,8 along with six key informant interviews. Desk research of institutions that have significant out- reach capacity, resources, and ability to offer schemes that meet the needs of informal sector workers was also undertaken. Insights from the LSNA (2022) survey and the assessment of institutional readiness were used to develop the policy recommendations in this report. Data for the LSNA (2022) were collected from 1,000 households that were randomly selected from a social registry of 15,000 households. The social registry includes potential beneficiary households/ respondents of the emergency Urban Cash Transfer Program (also referred to as SCT9-COVID). The sample was drawn from 10 low-income communities across Monrovia (see Table 1 for details). The sample TABLE 1: Sample size by community and gender Community Sample Selected Male Female Blamo Town 109 55 54 Central Logan Town 143 71 72 Jallah Town 89 45 44 Mambo Town East 84 42 42 Plank Field 130 65 65 Plumkor 42 21 21 Saye Town 83 41 42 Slipway 114 57 57 Wroto Town 81 41 40 Zondo Town 125 62 63 Total 1,000 500 500 Source: Survey sampling by the team. 7. Launched in 2011, the GFD is a nationally representative phone survey of ~1000 individuals from each country. The 2021 database covered about 128,000 adults in 123 countries. https://www.worldbank.org/en/publication/globalfindex. 8. The consultations were held with Telcos (Lonestar MTN, Orange); Associations (Liberia Credit Union National Association, Co- operative Development Agency, Liberia Marketing Association); Banks (EcoBank, Access Bank, LBDI), Govt agencies (Ministry of Small Business Administration, Ministry of Gender and Social Protection, Ministry of Finance and Development, Central Bank of Liberia); and Civil Society (Mercy Corps, BRAC). 9. SCT stands for Social Cash Transfer which is the often-used name of the Liberia Urban Cash Transfer program. Section 1: Introduction n  5 FIGURE 2: Distribution of household head age 5 4 3 Percent 2 1 0 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 63 65 97 71 74 Age Source: LSNA survey (2022). size per community was based on the community’s population density, and an equal proportion of male and female respondents were surveyed. The respondents are 500 female beneficiaries of the SCT-COVID registry who received the cash transfer and 500 male heads of household (or male enterprise owner in the household or the most appropriate male in the household).10 The household composition and labour force characteristics of our sample, notably participation rates and ownership of NFE, are similar to the overall urban population. The households in the LSNA survey mirror the demographics of a young population, with an average age of 33 (Figure 2). More than 50 percent of households have 3–5 individuals, with an average household size of 4.8 (Figure 3). Home ownership is low, with only 14 percent owning a home, and 66 percent reported living in a rented house. About three-quarters (73 percent) of respondents worked more than 10 hours per week; 40 percent identified as ‘self-employed without employees’ (Figure 4).11 Income from non-farm household enter- prises was the primary income source for 45 percent of respondents (Figure 5); by contrast, 68 percent reported running an NFE. 10. The SCT-COVID program in urban Montserrado was an expansion of the flagship SCT program into urban areas as part of the government’s COVID-19 response efforts, aiming to help vulnerable and poor families avoid engaging in short-term negative coping strategies during the pandemic. At closure, the SCT-COVID benefitted 14,855 households (or approximately 60,000 individuals) in 11 communities. The program selected the communities based on a number overlapping vulnerabilities (e.g., poverty rates, popula- tion density, lack of access to services and infrastructure) and universally enrolled all households in those communities. It delivered cash to households through mobile money transfers, with a benefit level of US$15 per capita up to US$90 per household per month (delivered in Liberian Dollar), paid for 2 months. 11. The most common work type is Petty trade (37%); 20% (wage labor in construction work); 10% (street food snack seller); 10% (Transport Kekeh driver). 6  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 3: Distribution of household size among survey respondents 250 Count of observations 200 150 100 50 0 1 2 3 4 5 6 7 8 9 >10 Household size Source: LSNA survey (2022). FIGURE 4: Employment status of LSNA survey respondents Self-employed without employees Paid employee Employer Self-employed with unpaid employees Paid apprentice Unpaid family helper Unpaid apprentice 0 5 10 15 20 25 30 35 40 45 50 Percent Source: LSNA survey (2022). FIGURE 5: Main household Income source of survey respondents Income from a household enterprise/business Salaries Wages Commission Remittances Pensions Rental Income, interest 0 10 20 30 40 50 Percent Source: LSNA survey (2022). Section 1: Introduction n  7 Salaried individuals had the most remunerative income source, and wage workers had similar in‑ comes as owners of HH enterprise. The low reported monthly income of households—only LRD 22,211 (US$141)—confirms that the LSNA survey sample covers the poor and vulnerable in urban Liberia. How- ever, within the sample, salaried workers (who make up 20 percent of the sample) earn more on average (Figure 6). They also have the most predictable source of income (Figure 7). Wage workers were likelier to have unpredictable income than those who depend on remittances and household enterprises. Wage workers also reported to be more dissatisfied with their living standards. For the purposes of this study, savings is defined as money that a person has left over after subtract‑ ing their consumer spending from their disposable income over a given period. Savings as a concept is subjective, and what constitutes savings can vary depending on the cultural and socioeconomic FIGURE 6: Average monthly hh income by income source 150 100 U.S. dollars 50 0 Salaries Wages HH-Enterprise Remittances Income source Source: LSNA survey (2022). FIGURE 7: Reported predictability of respondent’s income Predictable, consistent throughout the year Predictable, but changes slightly depending on the season Predictable, but changes dramatically depending on the season Unpredictable 0 10 20 30 40 50 60 Percent Source: LSNA survey (2022). 8  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector context.12 The survey included a prompt to clarify the definition of savings so that it would be inter- preted uniformly across the sample. Enumerators were required to read out the following prompt and confirm that respondents understood the same:13 the “money that a person has left over after subtract- ing their consumer spending from their disposable income over a given period.” Therefore, savings in the context of LSNA represent a net surplus of funds for an individual or household after all expenses and obligations have been paid. By design, savings in the context of LSNA refers to financial saving alone and does not include savings via other means like assets, gold, livestock, and so forth. The responses from the LSNA survey were analyzed to understand the impact of socioeconomic factors on the demand for savings. The propensity for saving (or ‘has saving’) variable is constructed using information about whether the respondent saves money. A logistic regression was used to esti- mate the conditional correlation of the demand for savings and several socioeconomic factors and other relevant variables. This was done in two phases. First, the study considered how employment and earn- ings correlate with the propensity for savings. Second, we looked at how financial integration and savings behavior of informal sector workers with different characteristics (e.g., preference for formal versus in- formal saving and group saving versus individual saving) affected their demand for savings. The report’s main findings align with the financial inclusion literature: the poor population saves and depends mainly on informal saving groups but aspires to some benefits afforded to those who can save with formal financial institutions. Savings in the informal sector purportedly allowed LSNA survey respondents to invest in their household enterprises and build resilience in the face of financial shocks. Access to mobile money significantly increases (by ~31 percent) the likelihood of saving among the urban informal poor, aligning with the more general literature that finds that integrating digital tech- nology into savings products increases their adoption. As per key informant interviews, informal saving group members believe their groups can scale up if they connect to formal financial institutions. In terms of program design, the study finds that the urban poor in Liberia prefer flexibility in access to funds, monetary incentives (even if minimal), and a commitment mechanism similar to group saving. Overall, the results of LSNA, supplemented by interviews, reveal that informal saving meets some critical needs of the target population. Still, there are unmet needs and an aspiration that opportunities can be unlocked if respondents receive some benefits similar to those who save in formal financial institutions. The policy report is written for two key audiences. First, it can inform Liberian policy makers who would like empirical answers to the five research questions and policy advice on how to build financial resilience among urban Liberians in the informal sector. Second, it may provide fresh insights to research- ers interested in better understanding the saving needs and behavior in a low-income, fragile country. This work is a feasibility study and, accordingly, does not focus on the implementation of saving schemes. International experience, however, suggests that in implementing saving schemes for the poor and urban informal sector, links to other social protection programs can be promising as they allow for building a 12. Savings is part of disposable income that an individual does not consume in a given period. It can also be described as an amount of money an individual reduces their current consumption by ,so that the money can be used in the future for various needs. The saved amount can either be used for a long-awaited purchase or invested to earn a profit (Addai et al. 2017). 13. Before survey Module 3, all enumerators were required to read the prompt on what savings meant and were trained to check with the respondent that they understood what savings for the purpose of this study entailed. All hired enumerators were local which also made them conversant in ‘Liberia English’. Section 1: Introduction n  9 continuum of protection across the lifecycle (Guven et al. 2021). The policy report has four sections. Sec- tion 2 answers the research questions, drawing from the LSNA survey findings, key informant interviews, consultations, and literature. Section 3 provides a light touch institutional readiness assessment of key players who can strengthen existing schemes and develop new ones. Section 4 concludes with policy recommendations on creating an ecosystem that supports a saving culture and piloting a micro-saving scheme to test its ability to address the unmet needs of Liberia’s poor urban informal sector. 10  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector SECTION 2 Answers from the ‘Liberia Saving Needs and Aspiration’ Survey This study deepens and complements the findings from the Findex Database by focusing on the saving behavior, needs, and aspirations of the urban poor and vulnerable informal sector individuals in Liberia. As noted, five key research questions guided our work. This section is organized according to those questions. I. Poor households in the urban informal sector save, but there is heterogeneity in savings behavior Poor households save, as per the literature, and the same is true among the urban poor in Liberia. At a global level, 71 percent of adults save in high-income countries, while only 43 percent of adults save in low-income contexts (Findex Database, 2017). Per Findex data, the overall population in Liberian and the poorest 40 percent save, but ratios have declined from 2017 to 2021 (Figure 8).14 The LSNA (2022) survey found that 56 percent of respondents saved money.15 Most of them (61 percent) save alone (Figure 9). The most common saving frequency was weekly, followed by monthly savings (Figure 10). Among sav- ers, 66 percent reported having savings at the time of the survey, and their total household savings (stock) was reportedly US$450 on average. Stakeholders reiterated these findings during consultations 14. According to Findex data, savers made up 68 percent of the population in 2017 but went down to 58 percent by 2021. The share of females who save went down from 64 to 52 percent from 2017 to 2021; male savers has gone down from 72 to 64 percent and savers in the poorest 40 percent of the population have gone down from 61 to 45 percent. The drop among the poorest 40 percent is higher than the rest, indicating their greater vulnerability. 15. The question asked to them was ‘Do you save money?’ The follow up question, to those who said yes, was ‘Do you currently have any savings?’ Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  11 FIGURE 8: Share of savers over time FIGURE 9: Who savers save with 72% 68% I save alone 64% 64% 61% 58% 52% I save with 45% my husband I save with 24% my family 63% I save with my neighbor Overall Female Male Poorest 40% I save with friends 2017 2021 Source: Global Findex Database. Source: LSNA survey (2022). FIGURE 10: Frequency of saving among those who save 180 161 160 154 Number of respondents 140 119 120 113 100 80 60 40 20 12 0 Daily Weekly Every two weeks Monthly No specific interval Frequency Source: LSNA (2022) survey, n=1000 respondents. and noted that while lack of disposable income prevented some of the poor from saving, the limited awareness around savings and lack of tailored products is what might prevent others. Despite Liberia’s fragile economic environment, the saving levels are consistent with averages in developing economies. On average, savers set aside US$35 (~LRD 5500) in savings per month,16 with 20 percent saving more than US$65 per month (Figure 11).17 Interviews of two susus and one VSLA member corroborated these findings as being a reasonable level of saving by the urban informal sector. The two 16. The key informant interviews revealed that monthly saving was what most individuals were familiar with; hence the survey re- quested respondents to share savings and all household income and expenditures in a typical month. 17. HHs with HH-Enterprises without employees are able to save more. No difference observed on where they keep their savings, respondent gender or on HH size.  12  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 11: Monthly household savings among savers (N=559) LRD 10,000 & above LRD 9,001–10,000 LRD 8,001–9,000 LRD 7,001–8,000 Savings per month (LRD) LRD 6,001–7,000 Mean: $35 LRD 5,001–6,000 LRD 4,001–5,000 LRD 3,001–4,000 LRD 2,001–3,000 LRD 1,001–2,000 LRD 501–1,000 Less than LRD 500 0 5 10 15 20 Percent Source: LSNA survey (2022). interviewed susu groups noted that their members are required to save between LRD 1000-LRD 2000 per week. The VSLA member interviewed said her group required a minimum of LRD 5000 per month. These findings are also consistent with saving levels among the poor population in other countries. (Collins and Morduch, 2009; Karlan and Ratan et al., 2014). Poor urban Liberians typically save 26 percent of their average monthly income. The average monthly household income of all LSNA respondents is US$135 (Figure 12), meaning the mean savings of $35 FIGURE 12: Monthly household (all incomes) (N=1000) Greater than LRD 42,001 Monthly household income (LRD) LRD 21,001–42,000 LRD 14,001–21,000 LRD 7,001–14,000 LRD 3,501–7,000 Mean: $135 LRD 701–3,500 LRD 0–700 I do not know 0 5 10 15 20 25 30 Percent Source: LSNA survey (2022). Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  13 typically make up 26 percent of the average income of the target group.18 It should be noted that the saving estimates are the average savings of the respondents who said they saved actively (viz only 40 percent of the sample). These estimates show a strong ability to save by at least a proportion of the vulnerable urban group. These estimates are consistent with the seminal work of Collin et al. (2009), that finds that poor households in Bangladesh, South Africa, and India, who are living on US$1–2 per day, typi- cally save about 25 percent of their income. The socioeconomic profile of savers in Liberia is similar to those in other low-income developing economies (see Box 1). Demand for savings among vulnerable urban Liberians is positively correlated with being less poor and owning a household enterprise. A 1 percent increase in a wealth index score19 is associated with a 4.4 percent increase in demand for savings. The findings are similar to those found in Ghana (Addai et al. 2017) and in southwestern Nigeria (Oladeji and Ogunrinola, 2001). When controlling for wealth, a Liberian who receives income from household enterprises is 16 percent more likely to save than someone who receives income from other sources.20 Those who own an enterprise are 27 percent more likely to save than non-enterprise owners, all else equal. BOX 1: Characteristics influencing demand for saving—findings from the literature Various factors influence savings among the poor in low-income countries, notably income, gender, and age. A study by Addai et al. (2017) focusing on the informal sector of Ghana revealed that gender and income were positively related to savings, and older adults were less likely to save than younger ones. A 2018 study with smallholder farmer youth from communities in Mozambique, Tanzania, and Pakistan also found that youth ages 15–30 saved, on average, US$174 over a year, four times as much as adults ages 31–60 did. The study could not show causality, and the authors cited the reason for the findings as youth having fewer expenses, a lack of access for youth to credit, or fear of credit (Anderson and Karuppusamy, 2018). Saving groups are found to be more commonly used by women (Gash et al. 2017; Staschen and Nelson 2013), while men were more likely to use formal methods of savings (Demirguc-Kunt et al. 2018). Empirical evidence suggests that saving outcomes are positive when women are involved in the financial decision- making in their households (Brown and Pehrson 2019; (Gash et al. 2017). The source of income and the predictability of income both affect the propensity to save. When controlling for wealth, the predictability of income, even if it may change dramatically by season, posi- tively and significantly correlates with savings compared to savers with unpredictable income. Income through salaries is also estimated to increase saving propensity by 15 percent. Other sources of income do not significantly influence saving behavior. The occupation type also strongly correlates with savings. Controlling for wealth, those working in petty trade/vendor /retail trades have a significant 19 percent 18. Those who save are wealthier so 26 percent of household income in savings is an upper bound. 19. We use the stock variables to construct this index (using Principal Components Analysis) which comprises ownership of house/ building, cultivable land, TV, radio, computer, refrigerator, bicycle, motorbike, car, kekeh, and livestock. 20. Other sources are salaries, wages, commissions, remittances, rental income, and interest. 14  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector higher propensity to save. Individuals in agriculture have a 27 percent lower propensity to save, but the same was not statistically significant. Financially literate individuals are more likely to save. Survey respondents with knowledge and aware- ness of financial products like saving accounts, credit, or insurance exhibited a higher propensity for savings. An increase of 1 percent in the Financial Literacy Index,21 keeping wealth constant, is estimated to increase the propensity for saving by 3.6 percent. Jamal et al. (2015) in Malaysia and Kalwij et al. (2019) in the Netherlands found a similarly significant and positive relationship between financial literacy and the saving behavior of individuals. In another study, Osei-Assibey (2015) concluded that financial literacy programs could potentially enhance the saving behavior of poor-income households in Ghana. Financially included individuals are also more likely to save. A financially included person in the con- text of the LSNA survey is one who owns a bank account, credit union, or susu account or uses mobile money. Controlling for wealth, such a person is 2 percent more likely to save than someone who does not use one of these mechanisms. Not all types of financial inclusion mediums have the same impact on the demand for savings, though. The probability of saving is 31 percent higher if the person owns a mobile money account and 21 percent higher if an individual deposits savings in a bank. Contrary to this, having an account with a credit union negatively correlates with the demand for savings; however, this outcome is not statistically significant. A study in Kenya also found that a financially included person could make better financial decisions and, therefore, would like to save more (Jack and Suri, 2011). Women are more likely to save. Controlling for wealth, women are 9 percent more likely to save than men. The survey in Liberia did not explore intra-household dynamics around saving. However, studies in similar contexts found that when saving methods include interventions that encourage women’s involve- ment in financial decisions at the intra-household level, saving outcomes tend to be more positive (Brown and Pehrson 2019; Gash et al. 2017; Karlan et al. 2017). A meta-analysis by Knowles et al. (2018) found that a sample composed entirely of women has a predicted 63 percent rate of opening a savings account with at least one deposit, while an all-male sample has only a predicted 26 percent rate. II. Vulnerable urban Liberians deliberately save to meet household human capital needs and for asset creation ‘.. it is true that informal sector workers do save, but it’s not clear how savings is impacting their lives.’—Stakeholder in the Government Consultations The vulnerable groups in Liberia who save do so with a specific goal that often includes meeting children’s education needs or asset creation through starting or expanding a business. About 97 percent of savers in the study reported saving with a specific goal. Among the top five current goals of savers (Figure 13) are children’s education (43 percent), purchase of land (36 percent), monthly household expenses (31 percent), business expansion (28 percent), and medical treatment (25 percent). When posed 21. The financial literacy index is constructed using the following variables: the respondent’s ability to read or write, ability to do basic calculations and the awareness of the respondents with terms such as bank loan, current account, saving account, debit card, credit card, pension, budget, taxes, insurance, and investment. Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  15 to the subset of those saving through susus, the same question revealed similar priorities (Figure 14). The consultations and in-person interviews also found that children’s education, school fees, and business expansion are among the most common reasons people save or seek a loan. The Liberian findings are consistent with the Global Findex Database (2021) data, where 62 percent of Liberians’ most worrying financial issue in 2021 was “paying school and education fees,” as well as with the international literature (Box 2). These findings suggest that the saving needs of the urban poor are to meet household human capital needs and boost their incomes, both important to building the resilience of the Liberian people and the economy. FIGURE 13: Current goals/plans for saving Others (specify) Children’s education Purchase of land Monthly Household Expense Goals of savers Household enterprise/business ex Medical treatment (anyone) Income generation activity Old age Debt repayment Travel expenses Marriage of children (any) Funeral expenses 0 5 10 15 20 25 30 35 40 45 Percent Source: LSNA survey (2022). FIGURE 14: Purpose of saving through susu Household expenses Susus savings priorities School fee loan Household enterprise loan Others (specify) Health Rental loan Personal consumption loan Saving only 0 5 10 15 20 25 30 35 40 45 50 Percent Source: LSNA survey (2022). 16  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector BOX 2: Why people save and the influence of perceptions on saving behavior The literature finds that saving is used for consumption smoothing, asset creation, and meeting short-term needs. Saving behavior is propelled by a need to balance current and future consumption, have financial security in the face of adverse risks, or cover expected expenses in the future (like education). Other reasons for saving include investments in business or livelihood or building access to credit and other financial services. More recent literature also finds that perceptions such as loss aversion (Imas, Sadoff, and Samek 2016; Thaler 2016), present bias (Laibson 2015), peer pressure (Beshears et al., 2015), social determinants (Hoff and Stiglitz 2016) and lack of self-control (Galperti 2015) can also influence saving behavior. In the context of poor informal sector workers who face a limited set of choices, present bias whereby individuals prefer current rewards over future rewards is especially acute. Laibson (2015) suggests that pre-commitment strategies can help present- biased individuals overcome this bias and achieve their long-term saving goals. These studies find that both internal factors, such as willpower, and external circumstances, such as limited income and low assets (Galperti 2015; Laibson 2015) can influ- ence saving behavior and intentions. Individuals are motivated to save when they encounter peers who save and see peers reaping positive utility out of it. While respondents reported needing a loan, few reported borrowings in the last 12 months. Among the 678 survey respondents who owned a household enterprise, 78 percent said they were “currently in need of a loan for their enterprise.” Reasons for a loan included financing to extend the enterprise area, purchase raw materials, and improve premises. Despite the reported need, only 9.3 percent of all respon- dents had borrowed in the last 12 months. Borrowers who secured loans did so from micro-finance insti- tutions (MFIs) (26 percent), a friend (15 percent), a credit union (14 percent), a local money lender (13 per- cent), or a formal financial institution (12 percent). A quarter of borrowers paid an interest rate greater than 20 percent on their loans. Household enterprise expansion was the most common reason for the loan (57 percent). The low reliance of the poorest on borrowing from formal institutions is also reflected in the Findex database. In 2021, 40 percent of the poor- est borrowers took money from friends and FIGURE 15: Borrowing methods among the family, followed by borrowing from a savings poorest 40 percent club (15 percent). While borrowing from formal 40% financial institutions is least common, time se- 35% ries Findex data finds that the borrowing by the poor from financial institutions grew from 7 per- cent to 16 percent from 2017 to 2021 (Figure 15). 16% 15% 15% Households depend on saving for productive purposes. Personal savings were used by about 7% 53.7 percent of households with an enterprise to finance the business at the beginning (Figure Borrowed from a formal Borrowed from Borrowed from 16). Nearly 30 percent of household enterprise financial institution a savings club family or friends owners said they still use personal savings to 2017 2021 sustain the operations of the household enter- Source: Global Findex Database (2017, 2021). prise monthly (Figure 17). This points to the Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  17 FIGURE 16: Source used to finance their household FIGURE 17: Frequency with which personal savings enterprise start-up, % is used for household business, % 35 Bank loan 30 Government 25 program 20 Percent Money-lenders 15 10 Borrowed from family/friends 5 0 Personal savings ly y e ly rly ks er ar kl us th ai ye ev ee rte ee D on o N w a ua W st M e o Q ng nc tw 0 20 40 60 O vi y sa er Percent Ev o N Source: LSNA survey (2022). Source: LSNA survey (2022). pivotal role savings can play in youth and vulnerable groups being able to invest and maintain their in- vestments in productive opportunities like household enterprises. Similar positive impacts of savings are found in the literature. In Nepal, access to basic savings accounts for households led to increases in fi- nancial assets and in human capital investments, including greater spending on food. Households headed by women increased their spending on education by 20 percent when given access to a digital savings Account (Prina, 2015). A randomized control trial in Western Kenya found that access to a traditional sav- ings account led to a 45 percent increase in productive investment, 27–40 percent higher personal ex- penditure, and 10–20 percent higher daily food expenditure among poor female daily income earners (Dupas and Robinson 2009). A sizeable proportion of the urban informal population displays financial resilience. Savings can improve financial resilience by cushioning households and prevent households from adopting damaging coping strategies when faced with a shock. The results of the LSNA survey reveal that close to 50 percent of respondents depended on savings to cover living expenses if a shock was to occur (Figure 18). Twenty- six percent of savers in the study said they could keep their savings up to a year without spending at least half of it. Only 11 percent of savers would need to use at least half of their savings in two weeks or less (Figure 19). Resilience is further demonstrated via respondents’ answers to how long they could continue to cover living expenses (without borrowing) if they lost their primary source of income. Forty percent of savers said their savings would cover their living expenses for 1-3 months, 18 percent could cover 3-6 months, and 13 percent for six months and up to a year (Figure 20). Together, these responses indicate a strong ability to save for a sizeable proportion of the target group. 18  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 18: Strategy to handle household expenses if a shock should occur, % Borrow from a friend or relative Pay with cash on hand/savings Borrow from savings group Look for another source of income Reduce household spending Migrate for work Request help from a charitable org Borrow from bank Borrow from moneylender at high rate Sell small livestock, household Break up the household Sell bicycle, land, tools Use formal insurance Use informal insurance, burial society 0 10 20 30 40 50 60 Percent Source: LSNA survey (2022). FIGURE 19: Time that savers can keep savings FIGURE 20: Time that they can use savings to cover without spending half of it, % expenses without borrowing, % > 1 year Don’t know 2% Up to a year >6 mos but < 1 yr 13% Up to 6 mos Up to 3 mos > 3 month but < 6 mos 18% Up to a month > 1 month but < 3 mos 40% 2 weeks > 1 week but < 1 month 21% A week < 1 week 6% < 1 week 0 5 10 15 20 25 0 10 20 30 40 50 Percent Percent Source: LSNA survey (2022). Source: LSNA survey (2022). Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  19 III. Susus are common but not the only or the most consistent way for the poor urban informal to save The Global Findex data finds that fewer Liberians save in formal financial institutions than in other developing and developed economies. Thirty-nine percent of Liberians save at a savings club, and only 13 percent save at a financial institution. In contrast, savings in financial institutions stand at 21 percent of savers in other developing economies and 55 percent in high-income countries. Similar to the experience in other developing contexts, when financial institutions do not serve the needs of low-income house- holds in the informal sector, the response is often a dependence on informal savings methods (Box 3), the creation of microfinance schemes (Rutherford 2012), or microloans to individuals to start businesses (Kwena and Turner 2013). The LSNA (2022) survey finds that poor and vulnerable urban informal sector workers are more likely to save in susus than the rest of the population. Respondents say that informal saving clubs (susus specifically) are the most common place for the target group to keep their savings. They are where 45 percent of poor urban informal Liberians keep their savings (Figure 21), as compared to 39 percent of the overall Liberian population, as reported in the Findex data. The next most common place is to store savings is at home (approximately 27 percent), followed by mobile banking (an estimated 19 percent) and depositing it in a formal bank (about 11 percent). Savings in mobile banking and deposits in banks are not negligible, indicating an appetite for formal financial institutions by urban informal workers. The respon- dents who save in their homes, a significant group, do not benefit from the opportunities that informal saving clubs or formal saving institutions offer, and the value of their money is eroded by inflation. BOX 3: Informal savings mechanisms in Sub-Saharan Africa (and beyond) Tontines and susu are a few of the names given to informal savings clubs used across the world. They are a form of informal finance that resembles Asian counterparts like ‘Arisan’ in Indonesia and ‘Paluwagan’ in the Philippines. Totines are the local name of Rotating Savings and Credit Associations (ROSCA) in Sub-Saharan Africa, while susu is more commonly used in Liberia and Ghana. The etymology of the word susu has been discussed by several authors Osei-Assibey (2005) referred to it as “bit-by-bit,” while Alabi, Alabi, and Ahiawodzi (2007) illustrated its meaning to be “plan” or “measure.” Susu has become a way for lower-income households to save. Operating in rural and urban areas, the mechanism is designed to encourage micro-saving through daily or weekly contributions (Aryeetey 2005). Like other saving groups, it operates on the concept of pool funding, in which a group is formed, and every member contributes on the decided time interval. Each member has a unique identification number and receives a pooled pay-out on a rotating basis, with the pro- cess repeated to serve everyone who has contributed. The scholarship on the susu discusses several aspects of saving and mobilizing funds. For instance, Alabi, Alabi, and Ahiawodzi (2007) referred to it as the mechanism to contribute capital to micro and small enterprises. Anku-Tsede (2013) points out that a susu’s primary role is to enable people to collect business funding. Seibel (2001) adds an additional view, explaining that susu groups create social insurance by providing necessary resources to members in desperation. 20  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 21: Places where informal urban Liberians keep their savings Susu club At home Mobile banking Deposit in bank account Others (specify) Give it to family Give it to a spouse VSLA Microfinance institution Credit union 0 5 10 15 20 25 30 35 40 45 50 Percent Source: LSNA survey (2022). Liberia’s susus have different design features and serve multiple purposes. Liberia does not have a database of susu groups, but information collected through interviews and consultations reports that susu are typically comprise 30–50 members living in a narrowly defined locale (Box 4). The design of susu varies, but in its simplest form, it is an arrangement where every group member contributes a set amount BOX 4: Voices of two Liberian susu club members Key informant interviews of two susu club members point to similarities in operations and why members save, but there are some differences in the saving ability of members and aspirations of the susu club. The two interviewees were members of the ‘Old school (OS)’ and ‘Great Commission (GC)’ susu respectively. ‘Old School’ susu, with 50 members, is exclusively composed of females, 30 percent below age 40. The interviewee estimated that number of members in Great Commission club was between 35-45, about 75 percent of whom were females and 45 percent of all members were below age 40. Both susus had been in operation for less than a decade. The former (OS susu) mandated LRD 3500 per week, and GC susu col- lected LRD 750 per week but allowed for flexible contributions. The payment was made once every week or month for OS susu and every two weeks for GC susu. Common reasons for using susu were reported as ‘to settle an old debt’ or ‘expand the business.’ Personal consumption was not reported to be a common reason for individuals saving in either of the two susus. Both susus used paper records, had an elected Board that was re-elected frequently, and imposed fines for late payments. Only one of them (Old School) offered emergency loans to members. All susu members of both had mobile money accounts, pointing to the digital savviness of their members. When asked if they considered opening an account with the Bank, the Old School susu said, “we used to, but one time we wanted to withdraw and could not, so we stopped.” The Great Commission susu, on the other hand, sought connections with the Bank as an opportunity to improve their relationship with the formal sector. Covid impacted them through “reduced value of hands” i.e., lower contribution by members or “suspension of hands” i.e., no contribution by a member at the scheduled payment time. Among the areas of growth sought for their susu most common was to “find more members and members who can pay more.” Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  21 at a particular interval (usually daily, weekly, bi-weekly, or monthly). At a determined frequency (usually bi-weekly or monthly), one of the members receives all the collected funds. This process repeats each month until all members receive the funds at least once. The financial benefit of saving with susus is that a member can receive a substantial lump sum when it is her or his ‘turn’ to collect funds. Relatively few susus offer interest on deposits. Some groups allow collected savings funds to be used as loans to group members in emergencies. Liberian susus serving urban informal members commonly require weekly contributions, provide weekly or monthly cash-out, and convene weekly meetings. Among those saving in a susu club at the time of the survey, 78 percent are members of only one group, and 20 percent save in two. Weekly pay- ments to susus are the most common contribution frequency and the cash-out frequency is equally likely to be weekly or monthly (Figures 22, 23). The regular payment among active savers in susu groups, in the LSNA survey, was LRD 6,108, and only 21 percent of those saving in a susu receive interest. Close to 30 percent of those in the susu groups report that their group meets every week (Figure 24). Only 42 percent of active savers report that their susu has a name, and most susus keep their money at the col- lector’s house (Figure 25), pointing to these clubs’ highly organic and informal nature. Some poor urban Liberians save in banks, and many use mobile money accounts. The empirical re- sults confirm that a small proportion of the sample use bank accounts. Only 18 percent of respondents own a bank account. The primary reason cited for not owning an account was “not having enough money” (Figure 26). Despite the documented barriers to saving in formal financial institutions, the litera- ture finds evidence that some poor do save/or aspire to save in formal banks. In Nigeria, the 2008 Fin- Scope survey found that 61 percent of those reported as unbanked indicated they would like a formal bank account. Among LSNA survey respondents, a minuscule number—only 16 of 1,000 FIGURE 22: Regularity with which payments are FIGURE 23: Frequency of cash out from susu made to susu group, % group, % Annually Monthly Quarterly Every two week 30 days Weekly Every two weeks Weekly Daily Other 0 10 20 30 40 50 60 0 5 10 15 20 25 30 35 Percent Percent Source: LSNA survey (2022). Source: LSNA survey (2022). 22  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 24: Regularity of susu meetings FIGURE 25: Where does your susu keep its money? No specific interval 27 32 Monthly 39 Every two week 10 Weekly 139 Other 0 5 10 15 20 25 30 35 Any others (specify) In mobile money I do not know Percent At the collector’s house In bank Source: LSNA survey (2022). Source: LSNA survey (2022). FIGURE 26: Reasons for not having a personal bank account I do not have enough money to have a bank account I do not have sufficient knowledge I do not have any need for a bank I don’t have the necessary docs Lack of cooperation by bank officer I don’t trust banks It is expensive to have a bank account Someone else in the family have Banks are too far away 0 20 40 60 80 Percent Source: LSNA survey (2022). respondents—save with credit unions. Promisingly, nearly 90 percent of LSNA respondents own a mo- bile money account, though half use them only occasionally (Figure 27). A Burkina Faso study found that individuals used mobile money mainly because of its safety and convenience of not traveling extensive distances (Ky, Rugemintwari, and Sauviat 2018). The authors also found that mobile money improved the likelihood of saving for health emergencies, especially among those from rural areas, females, having lower education levels, and irregular income. Despite the prominence of susus in Liberia, there is evi- dence of some heterogeneity in where people save. Similar findings were documented in the Financial Diaries project, which found that poor rural households in South Africa and India can use up to four different savings mechanisms on average throughout the year (Collins et al. 2009). Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  23 FIGURE 27: Frequency of use of mobile money, % 60 50 40 Percent 30 20 10 0 I don't use mobile money Daily Weekly Every two weeks Monthly Once in a while Frequency Source: LSNA survey (2022). FIGURE 28: Share of respondents who have an active account in the indicated institution 10% Mobile Money 98% Credit Union 82% Bank No Yes 63% Susu 0 20 40 60 80 100 120 Percent Source: LSNA survey (2022). The LSNA (2022) survey found that while susus was where most people kept their savings, it is not the most actively used. Sixty-three percent of those who said they save money in a susu did not have an active account at the time of the survey.22 The activity rates are highest among those with a mobile money account, which indicates their frequent use of this digital account. Notably, while banks have a high rate of inactivity, the respondents use them more often than a credit union account (Figure 28). 22. Ensuring persistence in saving is a challenge for people in developed and developing countries (Dupas and Robinson 2013a,b) which is exacerbated by limited opportunities, lack of easy saving options, and little financial awareness. 24  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector IV. All existing saving modes exhibit some barriers but there are silver linings Susus in urban Liberia, like much of Sub-Saharan Africa, are widely accessible and generally liked. Nearly 60 percent of survey respondents reported that they could reach their susu club in less than 10 minutes walking distance, while forty percent of respondents needed to take a bike to reach their closest bank (Figure 29a,b). Cash-out points are however even more accessible than susus with 70 percent of respondents being able to reach one in less than 10 minutes of walking distance (Figure 29c). Relative to other modes of saving, susus are easier to access funds from yet again second to cash out centres (Figure 30). Between banks and credit unions, the former is easier to access funds from. Susus are also signifi- cantly more likely to be recommended to a friend than ROSCAs, VSLAs, and credit unions (Figure 31). FIGURE 29: Distance to the nearest bank branch (panel a), susu deposit place (panel b), mobile money cash out point (panel c) a. Distance to the nearest bank branch Have to travel on bike/motorcycle/bus/car At a walking distance of more than 30 mins At a walking distance of 20–30 mins At a walking distance of 10–20 mins At a walking distance of less than 10 mins 0 10 20 30 40 50 Percent b. Susu deposit place Have to travel on bike/motorcycle/bus/car At a walking distance of more than 30 mins At a walking distance of 20–30 mins At a walking distance of 10–20 mins At a walking distance of less than 10 mins 0 10 20 30 40 50 60 70 Percent c. Mobile money cash out point Have to travel on bike/motorcycle/bus/car At a walking distance of more than 30 mins At a walking distance of 20–30 mins At a walking distance of 10–20 mins At a walking distance of less than 10 mins 0 10 20 30 40 50 60 70 80 Percent Source: LSNA survey (2022). Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  25 FIGURE 30: Ease in accessing saved funds 100 90 80 70 60 Percent n the 50 40 30 20 10 0 Susu CU Cash out centre Banks VSLA Do not know/Never used it Extremely Easy Easy Difficult Extremely Difficult Source: LSNA survey (2022). Note: Cash out centers or Points of Sale are where individuals can ‘cash out’ their balance in the mobile money account to cash FIGURE 31: Degree to which the respondent would recommend each type of savings institution to a friend (Rank 1: not at all; Rank 4: highly recommend) ROSCA Susu 0 20 40 60 80 100 0 20 40 60 80 100 Percent Percent VSLA Credit Union 0 20 40 60 80 100 0 20 40 60 80 100 Percent Percent Rank 4 Rank 3 Rank 2 Rank 1 Rank 0 Source: LSNA survey (2022). Note: Rank 0 is not recommended at all, Rank 4 is most recommended. Susus are by far the most recommended, but 30 percent of the sample also rank it the lowest. 26  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Susus are preferred over informal or semiformal saving modes in Liberia, but there are perceived design, effectiveness, and trust issues with susus. On the design side, the group commitment feature of susus can serve as a double-edged sword, as aptly explained by one of the interviewees: “…we go door to door, if necessary, to collect money from members. If they don’t pay, there is a fine ... but COVID has hurt us; fewer members are paying their dues, so we need more members who will pay more.” —Old Susu Club, Montserrado The community ties forming the basis of most susu clubs and the peer pressure that makes people stick to their saving goals are features of informal group savings that make them sustainable. However, when a shock hits (like COVID or a decline in local business), all individuals in the same community will likely be affected. Even if a few stop paying their dues, the pot of money that can be circulated goes down and can discourage others from paying, which risks the sustainability of the susu. Respondents reveal that susus are not perceived as instruments that can be depended on when a shock hits. Only 28 percent of those who save in susus report that they could rely on their susu fund in emergencies. Instead, these groups will likely remain vulnerable against shocks despite their contribution to the susu. The most disadvantaged groups (women, disabled, and youth) might have more difficulty accessing their funds in times of shock and limited recourse if funds are misused, due to their lower social capital/bargaining power within the community and on average poorer literacy rates. Urban informal savers uniformly trust no single instrument. Figure 32 explores trust dynamics related to savings, finding that respondents have strong and opposing views about trusting Government, NGOs, MFIs, and to some extent susus, with their money. Twenty percent of respondents express high trust in saving through susus, yet close to 40 percent do not trust susus at all. That said, susus are more trusted than credit unions and community leaders but less trusted versus the other alternatives. FIGURE 32: Degree of trust in alternative savings mechanisms Community Leader NGOs MFIs Credit Union Susu Telecom company Government 0 20 40 60 80 100 Percent To a high extent To a moderate extent To some extent A little Not at all Source: LSNA survey (2022). Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  27 Banks do not meet the target group’s needs, but they feature in the aspirations of this group. Con- sultations revealed that people do not trust and often fail to understand the rules of the formal banking system, dissuading them from saving in banks. During consultations, a civil society actor remarked that a low-income urban informal sector worker in Liberia “fears the bank might take funds out of their sav- ings account if they default on loans.” A lack of understanding of the banking system creates anxiety and fear. Among those who save in banks, the inaccessibility of banks can discourage them from saving consistently. Stakeholder consultations revealed that the urban poor faced common barriers to saving in banks, including long wait times, limited bank hours unsuitable for daily wage workers, and frequent cash shortages. The interview with the Old School susu reported that they had opened an account in the bank so that their members might benefit from formal credit access but cannot always withdraw funds. Despite the challenges with saving in a bank, the surveyed group prefers some of the features of formal saving modes, notably the easy access to withdraw funds, higher security, and privacy (Figure 33). Susus in Liberia are not documented and overwhelmingly use digital-based records, which exposes them to errors, loss of information, and a higher likelihood of default. Among respondents who saved at least once in a susu, 47 percent have been fraud victims. Among the victims of the fraud, more than half (58 percent) said they stopped saving through susu since the fraud; 22 percent said they con- tinued saving but with a different susu, while 10 percent said the fraud had not altered their trust in susu. Notably, 28 percent of LSNA survey respondents have saved in a place that permanently ran out of funds, highlighting the vulnerability and risks in this saving mechanism. The Liberia experience reflects the global literature that cites a lack of organized structure, fragmentation, and outdated financial man- agement methods as threats to the accountability and effective functioning of informal savings groups FIGURE 33: Preferred characteristics of formal saving methods I don’t prefer anything about this method It is easier to keep records I can keep my account's amount secret I want to start building my financial history I need foreign currency I can get my money back easily Higher security ATM availability I can use debit/credit card I can use digital platforms to contribute 0 10 20 30 40 50 60 70 80 90 Percent Source: LSNA survey (2022). 28  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector (Glisovic, El-Zoghbi, and Forster 2011) by increasing the likelihood of theft and fraud with limited legal or regulatory recourse.23 A study in Uganda found that 99 percent of clients saving in the informal sector reported losing some of their savings (Wright and Mutesasira 2001). This is compared to 26 percent of those saving in the semi-formal sector (MFIs, SACCOs) who reported some lost savings, and 15 percent of those saving in the formal sector (banks, pension funds). Mobile money accounts in Liberia are common and telcos offering these accounts are trusted but these accounts are not used for saving. Nearly 90 percent of respondents own a mobile money ac- count/wallet, of which 62 percent have only one and 37 percent have two accounts. The most common use of mobile money is to send/receive payments for personal use (by 94 percent of respondents), fol- lowed by airtime (36 percent), business transactions (27 percent), remittances (15 percent), and bill pay- ments (12 percent). Close to 95 percent of respondents go to a cash-out center to withdraw the balance from their digital account, pointing to the preference for cash rather than digital transactions. Consulta- tions with civil society indicated that overcharging transaction fees at cash-out centers is rampant, though 65 percent of LSNA respondents felt agents do not overcharge them. Another 9 percent felt all agents overcharge and 26 percent said some overcharge. Overcharging by telcos did not emerge as a significant issue in the LSNA results. In consultations with telcos, they confirmed they have been working proactively to crack down on agents who overcharge. Despite the prevalence of mobile money ac- counts, its growing accessibility and trust (due to proactive action by telcos and/or pandemic induced behavioral changes), telcos are currently not allowed to offer savings linked to mobile money wallets (see Section 3 for more details). Overall, the survey results point to informal methods being common but not without their faults, and banks, while used sparingly, having some desirable features. The results for Liberia are consistent with several empirical studies using data from other countries (see Table 2 for a compilation of con- straints and benefits with various saving modes). These studies report the lesser adoption of formal savings methods among the low-income population due to high transaction costs, lack of trust rigid regulatory framework, low confidence, knowledge gaps, social constraints and behavioral biases (Karlan, Ratan, and Zinman 2014). The LSNA survey analysis finds that those using informal means of saving (com- munity-saving groups such as susus, ROSCAs, and at home) are 5 percent more likely to save. A negative correlation is found between those who save in banks and the demand for savings. However, this associa- tion is not statistically significant. 23. The global literature further develops the concept of the risks of savings groups by pointing out that they are not ‘flexible’ because they depend on members to make regular contributions; they have limited product offerings and low technical and hu- man resource capacity to innovate and invest funds. Most importantly, the ‘sustainability’ of these groups is threatened by their inability to take advantage of economies of scale and access more credit at cheaper rates via links to the formal financial system. These constraints leave the low-income informal sector, which depends on saving groups, trapped in a cycle of poor resilience and limited opportunities. Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  29 TABLE 2: Constraints and benefits of various saving modes Saving mode Benefits Constraints Informal community- • Serve poor clients, mainly women • Limited product offering managed saving groups • Operate in remote areas • Limited managerial capacity and poor management of records (susu, ROSCAs, ASCAs, • Self-replicating • Limited scalability VSLAs etc.) • Build social capital and self-esteem • Limited asset building • Trusted by the community • Exclusion of poorer population • Risk of theft Credit union • Simple products • Governance challenges • Inherently savings led • Finding the right balance between saving and borrowing interest • Accessible by poor • Lack of effective regulatory framework in some countries • Low transaction cost • Challenges with record keeping Banks targeting • Capacity and technical expertise to • Improvement in product design and marketing is a need informal sector/micro mobilize savings • Limited distributional channels finance institutions • Perceived to be safe and secure Mainstream commercial • Broad range of products • Not orientate toward serving a low-income population banks • Large network • Unaffordable products • Established system and extensive • Expensive delivery channels experience • Linkages to payment systems Saving at home • Easiest access to funds • Loses purchasing power • No risk of fraud by outside parties • Privacy and security issues • No transaction costs • Likelihood of using it for short-term needs • No financial gain or productive use of funds Source: Adaptation of Glisovic, El-Zoghbi, and Forster (2011). V. Poor urban informal sector Liberians would like savings mechanisms to be digital, group-oriented and include savings incentives The LSNA (2022) survey included questions to understand the features of a micro-saving product that would be attractive to the urban poor and vulnerable informal sector. Three clear preferences emerged from the survey. First a significant proportion of respondents preferred using digital means to save. About 60 percent of the LSNA survey respondents are willing to save individually using digital means, with less than 5 per- cent suggesting they won’t prefer it. About 50 percent of the sample is willing to save in a group using digital means, but 15 percent would not prefer it (Figure 34). Privacy in savings is valued by many respon- dents, with 57 percent reporting that they would like to have a private saving account so that their network is not aware of their actual amount of savings. Study by Karla et al. (2016) has found that the privacy and security of mobile savings decreases the pressure on women to share income or to spend it right away thereby increasing their decision making power and economic independence (Hoff and Stiglitz 2016). 30  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 34: Preference of linking mobile money account to group savings (left) and individual savings (right) Not at all To a moderate extent To a small extent To a high extent Neutral Source: LSNA survey (2022). The Liberian preference for digital savings aligns with the benefits of digital methods, notably mo‑ bile money, observed in other countries. Mobile money has enabled the underprivileged population to access financial services, reduced operating costs, and generated a profitable ecosystem for the ser- vice provider, users, and businesses, especially in developing countries. A report by McKinsey Global In- stitute (Manyika et al. 2016) estimates that digital finance costs are 90 percent lower than traditional fi- nancial systems, making it affordable for the poorest. In Africa alone, the results are astonishing. M-Pesa, introduced in 2007, had an account penetration rate of 73 percent as of 2017 (Coulibaly 2021). A study by Jack and Suri (2011) found that 75 percent of M-Pesa users were using it for saving purposes without re- ceiving any interest. There are, however, challenges related to internet availability and hesitance to adoption of digital technology. Like other low-income African countries, Liberia has low financial and digital literacy, poor regulation, and low penetration in rural areas. The LSNA survey points to a strong appetite for digital adoption to boost savings. This is a promising first step in rethinking how existing and new saving schemes can be adapted to meet the needs of the target population. In designing policy solutions, practical reali- ties like the cost of purchasing a new device and explaining the technology to a less educated group of individuals24 will need to be considered. Second, despite the articulated need for privacy, group savings were seen as more beneficial than individual savings by 60 percent of the sample. The preference for group savings stood out in the LSNA survey results. The reported reasons appear to be quick and easy access to funds when needed and fa- miliarity with knowing where the money is kept (Figure 35). Still, 35 percent do not prefer it over formal 24. A study conducted on women in Liberia revealed that since the Mobile Financial Inclusion push in 2007, many providers had developed products without considering the needs of the illiterate population, with no incentives for them to save (Williams 2018).  n  31 FIGURE 35: Reasons why group saving is preferred to formal savings I don’t prefer anything about this method It is easier to keep track of my I don't understand formal scheme I like to help the people I know I can get my money back the moment I need it I like to know who is keeping my money I prefer to know all members of my saving group I do not trust formal financial institutions 0 10 20 30 40 50 60 Percent Source: LSNA survey (2022). savings methods. The commitment feature which group savings offers also make them more effective. Individual accounts replicate the commitment feature of group savings through ‘default savings’. The experience of saving through defaults in Afghanistan changed participants’ perceptions—realizing that they were not too financially constrained to save as they had before the study (Blumenstock et al. (2018).25 Microcredit borrowers in Guatemala were offered savings accounts with different features, in- cluding reminders about a monthly commitment to save and a default of 10 percent of loan repayment as a suggested monthly savings target. It was found that both features increased savings balances sub- stantially (Atkinson et al. 2010). Third, saving incentives are attractive to urban informal Liberians, especially life and health insur‑ ance (Figure 36). The LMNA respodents were overwhelmingly in favor of the four incentives (points redeemable in commercial locations, matching savings contributions, better interest rates, and life or health insurance) and one nudge (a weekly reminder to save) that was asked about in the survey. The most popular was life or health insurance, matching grants, and higher interest rates. Interviews with susus groups also found that insurance was an attractive incentive to encourage people to save more. The tangible and immediate gratification that health and life insurance and additional money via match- ing grants or higher interest payments can offer is a key reason individuals prefer them. The literature agrees with the findings that introducing saving schemes alone is insufficient to in‑ crease the saving rate. Behavioral nudges that show promise include sending reminder text messages (Karlan, Ratan, and Zinman 2014) and tokens to reward good saving behavior (Akbas et al. 2016). However, 25. This study in Afghanistan worked with employees of mobile network operator Roshan with titles like manager, engineer, secu- rity guard and janitor being paid with M-Paisa (Blumenstock et al. 2018: 2874). “27% of participants in the study reported at least one family member went without a meal in the week prior to the baseline survey” (Blumenstock et al. 2018: 2885). 32  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 36: Would you or your household be willing to save more or more often in case of Life/health insurance Better interest rate Weekly reminder to save Matching contribution by govt Points to redeem at a grocery store or a gift like free airtime 0 10 20 30 40 50 60 70 80 90 100 Percent I don’t know No Yes Maybe Source: LSNA survey (2022). incentive design must be tested in the local context. Akbas et al. (2016)26 studied the impact of financial incentive on saving behavior of informal sector workers in Kenya for six months and found that, which text reminders and celebratory prompts increased savings, the matching contributions did not yield any positive outcomes. The authors conclude that the value of the matching grant was not attractive enough for the participants to change their saving behavior. In summary, the research findings point to a diversity in savings needs and scope for the unmet needs to be addressed by offering alternative modes of saving that draw the best from the current set of savings options. Among the urban informal, not all can save at all times. But most can save some- times, and some can save consistently. When they save, they aim to improve their financial resilience and expand their opportunities through business expansion. However, they primarily use one instrument, notably susus, to meet all their needs. Susus are embedded in the Liberian culture and serve the needs of this group which otherwise would remain excluded from any financial protection whatsoever. How- ever, like individuals’ needs are diverse and change over one’s lifecycle and income, the instrument should also. Some groups prefer formal financial institutions’ flexibility, security, and privacy, while others appreciate mobile money’s ease. Digital savings is also not a panacea, but a promising alternative, espe- cially as the respondents report high trust and familiarity with telcos in Liberia. These results point to benefit of strengthening and streamlining viable susus while exploring alternate modes of saving which 26. Akbas et al. (2016) offered the control group weekly reminders and a balance report through text messages, while the treatment group was treated with three different types of conditions: (i) a reminder text message designed as if it was from the participant’s children, (ii) a golden colored coin with the number of weeks of saving mentioned on it, and (iii) a 10–20 percent matching contribu- tion on the saved amount per week. The group showed a 100 percent increase in saving behavior on receiving a reminder text vis-à-vis the control. The treatment group that received a gold coin displayed more than 100 percent saving behavior than the control group. Section 2: Answers from the ‘Liberia Saving Needs and Aspiration’ Survey n  33 are easy to use. By connecting individuals to formal financial institutions and the government, the finan- cial resilience of the vulnerable can be improved by offering them targeted incentives and schemes that meet their needs. In the next section, we look at the readiness of select institutions in Liberia to better align services to accommodate the urban informal, including offering digitally enabled flexible and secure savings options (micro savings). Such schemes are being tested in other contexts and, based on LSNA findings, could be relevant to better serve the savings needs of the urban informal population. 34  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector SECTION 3 Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings Innovations in savings schemes require a rethink of how Liberian institutions and policies can better serve the needs of poor and vulnerable urban Liberians. The LSNA survey finds that informal savings are the predominant saving mode in Liberia, but they have challenges. Unlike workers in the formal sec- tor, who have access to multiple savings, credit, and insurance options, the choices for those in the in- formal sector are limited. The high administrative cost of reaching informal sector workers has prevented formal financial institutions from expanding their customer base to include this group. Countries have also focused more on formalizing workers and less on offering this group a similar set of financial services as the formal sector. Times are, however, changing. Schemes launched by micro-financial institutions, rising penetration of mobile money, and growing aspirations of individuals are forcing a rethink of the role policy and institutions can play to meet the saving needs of the diverse and large group of informal sector workers. Institutions will need to be able and willing to adapt their processes so that informal sector workers can save in an easy, affordable, and safe manner. The solution is not a few options to save but a diverse set of options. This section reviews three institutional models in Liberia to assess their appropriateness for provid‑ ing a digitally enabled micro-savings (m-savings) scheme that could serve urban informal Liberians. Telcos, select banks, and credit unions were identified as institutions that hold promise in terms of Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  35 BOX 5: Why IDs and payments are foundational blocks for success of micro-saving schemes In 2011 the Government of Liberia (GOL) enacted the National Identification Registry Act to establish national identifica- tion. The law called for the setup of a National Identification Registry (NIR) to be responsible for issuing a biometric-based identification card to each citizen and resident in Liberia. As of 2015, no official identity card was issued to people in Liberia. Roughly 10.6 percent of the population of Liberia was registered in a civil registry managed by the Ministry of Health and Social Welfare, and only 26 percent of children were registered at or around birth (World Bank 2016). Enrollment for the NIR began in 2017 with a plan to achieve total coverage by 2023. Since a unique digital identity was unavailable for most Liberians until recently, different government agencies had created their digital identity programs. As of 2016, five digital identity pro- grams were being run and each used its technology and processes with no interoperability of data across programs (World Bank 2016). In the absence of a harmonized functional identity program (until the implementation of NIR IN 2017) it was diffi- cult to scale up programs, or to make them efficient and cost effective. This lack of efficiency particularly hurts informal sec- tor workers who cannot bear the transaction cost associated with any scheme that needs to first ensure their uniqueness. The provision of payments also directly affects a scheme’s success or failure. An entire scheme can be undermined if pay- ments do not reach the correct people at the proper time, in the proper place and the correct form, in an efficient manner, and the correct amount. The Inter-Agency Social Protection Assessment tool, developed by the World Bank, a embodies three criteria for the assessment of the quality of social payment delivery mechanisms: (1) accessibility (cost of access, appropriateness, rights, and dignity), (2) robustness (reliability, governance, and security), and (3) integration (financial inclu- sion and coordination). The benefits of a government establishing social payment delivery systems is that it can achieve economies of scale and minimize exclusion errors. a. https://www.worldbank.org/en/news/video/2016/02/25/what-is-ispa. offering saving schemes to informal sector workers. However, the LSNA survey found that credit unions were not common, accessible, or popular with the target group. Interviews reveal possible reasons for the same could be the high membership fees, minimum initial deposit requirements, and a limited num- ber of offices to serve clients. Thus, credit unions were dropped from the readiness assessment. Based on consultations at the inception stage, we select a couple of companies in each category for the assessment. Under each institutional model, we review the extent to which they are ready to execute five es‑ sential functions needed for a micro-saving scheme. The five functions are: outreach capabilities, a record-keeping (MIS) platform, a contribution collection function, an easy withdrawal function, and policy oversight.27 At a global level, schemes for the informal economy that have been able to scale-up have these five functions in place. They function alongside foundational systems like identification and digital payment capabilities to carry out the five functions seamlessly without incurring high transaction costs (Box 5). The lack of interoperability across systems, fragmentation or delays can risk informal sector workers losing trust in the scheme—a key factor determining savings uptake and persistency. 27. Micro-saving schemes are administered using a specialized digital benefits administration platform and are able to keep indi- vidual records, collect contribution collection mechanism, channel incentives from the government, and a mechanism to credit interest earnings back to the individual accounts and keep track of withdrawals (Guven et al. 2021). 36  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Liberia’s financial landscape The Liberian financial sector comprises an array of financial institutions: commercial banks, micro- finance banks, non-banking financial institutions, rural community financial institutions, credit unions, insurance companies, VSLAs, and mobile money operators. There are nine primary commer- cial banks, a micro-finance bank, and thousands non-banking financial institutions (NBFIs). As of 2017, the Central Bank of Liberia reported that there were also 12 rural community financial institutions (RCFIs), about 275 credit unions, 19 insurance companies, and approximately 1,450 informal village and savings loan associations in Liberia. Two leading mobile money providers (Lonestar Cell MTN and Orange Liberia) and newly licensed financial technology companies provide remittances and digital financial services. Lonestar Cell MTN accounts for more than 50 percent (O’Grady 2020) of mobile operations in Liberia. Based on recent CBL data, both Lonestar Cell MTN (“Lonestar”) and Orange have increased their (com- bined) agent from 7,000 agents in 2018 to over 50,000 agents in 2021 (CBL 2019a: 75; CBL 2021: 87). Digital financial landscape of Liberia The digitalization of cash payments has been growing globally and in Africa, holding promise for citizens especially in the informal sector. In Sub-Saharan Africa, the use of electronic instruments for the pay- ment of cash transfers rose significantly, from 20 percent in 2012 to 71 percent in 2018. The digital financial landscape of Liberia is guided by the Central Bank of Liberia’s National Financial Inclusion Strategy (NFIS)—2020–2024 (CBL 2019b). Two previous NFIS (2019–2013 and 2014–2018) fo- cused respectively on establishing a “sustainable industry to enhance access to diversified financial ser- vices” and “bolster national efforts to promote broad access to financial services in Liberia.” NFIS, 2020- 2024, focuses on leveraging progress made under the previous two NFIS regimes, explicitly focusing on advancing digital financial services. The 2020–2024 NFIS also aims to bolster the regulatory framework in Liberia to enhance institutional and consumer capacity in achieving financial inclusion for all (CBL 2019b). The NFIS 2020–2024 vision is supported through a framework with three key implementation pillars— Pillar 1 on access to financial services and credit, Pillar 2 on digital financial services and Pillar 3 on Con- sumer Protection and Financial Capability. In addition to the NFIS, the CBL has developed the strategic plan 2021–2023 to further redefine the Central Bank’s policy priorities. By the end of 2023, Liberia aims to have made significant steps towards achieving a “stable, modern, and competitive financial system that provides a supportive infrastructure and access to quality and affordable financial services” (CBL 2019b). In line with the vision laid out in the NFIS, Liberia has made progress in scaling up digital financial services, primarily in urban areas. The progress in the uptake of digital services is reflected in an in- crease in mobile money adoption, e-payments, and improved inter-mobile operators and banking sector connectivity. For instance, according to the 2021 Global Findex, as teachers began receiving their salaries by digital deposits, the total cost of collecting their money, including bus fare to travel to collect money in person, fell by 92 percent, from US$25 per paycheck to US$2.28 They could also spend more time in 28. The savings were largely because teachers no longer needed to travel long distances, miss hours of teaching, and pay cash-out fees. Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  37 the classroom because they no longer had to take time off to travel into town to collect their wages.29 The volume of banking transactions increased 90 percent (CBL 2021: 85) from 2020 to 2021, likely due to the push-and-pull30 service, that is, the ability to easily transfer money between their mobile and bank accounts. Key factors that have enabled the Liberian economy’s digitalization include the level of inter- net penetration in the country, regulatory alignment, and free market competition. Mobile money activities have become Liberia’s dominant digital financial services driver for the last five years. Since the inception of mobile money over a decade ago, subscribers have risen from 256,000 in 2014 to 2.8 million by 2018, equivalent to 56 subscribers per 100 people. In terms of monetary value, transaction volume continues to grow. In 2021, transaction volume rose more than 200 percent to US$13.3 million from US$3.3 million in 2020. Unsurprisingly, the 2021 Global Findex shows that 53 percent of the population have accounts at a financial institution or with a mobile money provider, an increase from 35.7 percent in the 2017 Global Findex. Before the inception of mobile money in 2011, that number stood at just 19 percent of the population having accounts at a financial institution or with a mobile money provider (CBL 2019b, 2021). Digital tools—especially mobile technology—and complementary investments in social protection systems can be used to make saving easy, accessible, and cost-effective. As the ubiquity of mobile phones and familiarity with this technology grows, they can serve as an easy and accessible mode for saving. However, findings from the LSNA (2022) and the general literature also show that simply opening a Bank account or digital saving account does not lead to regular usage or increased savings (Anderson and Karuppusamy 2018; Dupas et al. 2018; Resch 2017) (see Box 6 on digital savings). Liberia’s regulatory re-alignment has also contributed to improving digital financial services, but more can be done to provide policy clarity. The CBL is the financial sector’s centralized regulatory and supervisory authority. Since 2011, the CBL has issued numerous regulations ranging from the adoption of mobile money to regulations on agent banking and regulations on payment services providers. This has clarified the roles and expectations of companies providing digital financial services in Liberia. Particu- larly, the regulation concerning licensing and operations of electronic payment (e-payment) services in Liberia clarified payment services requirements, including amount threshold, Know-Your-Customer (KYC)31 requirement, and payment types. The CBL has also rolled out a collateral registry, a credit refer- ence system, and licensed mobile money, service providers. These are positive developments aimed at building an administrative link between the informal sector workers and the Government of Liberia. Despite the prevalence of susus, a governance arrangement or data on them are lacking. A gover- nance arrangement by the Central Bank of Liberia could serve as a guiderail for the private sector to 29. Data: The global findex database 2021: Financial Inclusion, digital payments, and resilience in the age of covid-19 (2021, June 29). Retrieved February 12, 2023, from https://www.worldbank.org/en/news/video/2022/06/29/video-the-global-findex-database- 2021-financial-inclusion-digital-payments-and-resilience-in-the-age-of-covid-19. 30. Push and Pull in mobile money refers to a service which aims to make making banking more accessible and convenient for users. It provides customers access to their bank account by linking it to their mobile money wallet. 31. KYC or Know your Customer check is the mandatory process of identifying and verifying the client’s identity when opening an account and periodically over time. To meet KYC requirements, individuals must provide proof of their identity and address, such as ID card verification, face verification, biometric verification, and/or document verification. 38  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector BOX 6: Literature’s findings on digital savings Mobile money’s benefits on the poor’s overall welfare are well documented but its impact on savings is less con‑ clusive. Mobile money does not tend to impact the level of savings; but there is suggestive evidence that mobile money accounts can be used as a substitute for informal savings. The biggest impact on savings with mobile money seems to be for migrants and firms with high cash turnover. For example, households in Bangladesh that had urban migrants and actively used mobile money saved 296 percent more than nonusers.a Similarly, 83 percent of microentrepreneurs in Malawi used mobile money accounts to save when there were no withdrawal fees and continued to save via mobile money following the intervention once withdrawal fees increased (Aggarwal, Brailovskaya, and Robinson 2020). Promising results were found in Kenya where access to mobile money lifted 2 percent of Kenyan households out of poverty. The impacts were greatest for women. The country saw a 22 percent drop in extreme poverty and a 20 percent increase in savings between 2008 and 2014 (Suri and Jack 2016). Experiments that connect informal savings groups with mobile “solutions,” including digital wallets, digital savings platforms, and mobile banking apps have also shown early promise (Ardic et al. 2019). Savings groups using or testing mobile savings tools have identified key early lessons. These include higher confidence in the digital wallet when trusted providers and agents are involved, and improved digital inclusion measured by higher confidence in and ability to use the platforms’ other services. (Akbas et al. 2016; Ardic et al. 2019). Key success factors for mobile money uptake include the involvement of micro-financial institutions, high agent penetration, existing digital literacy, easy Know Your Customer (KYC) norms, and a supportive policy environment. Transaction costs in mobile money can be an important factor determining uptake, but the waiver of the same does not significantly increase savings (Mel et al. 2020). Complementing digital savings with business training can increase women’s savings and empower them, as seen in case of M-pawa in Tanzania. M-pawa is a digital saving and loan account provided by Commercial Bank of Africa and Vodacom Tan- zania on the M-Pesa mobile money platform. Bastian et al. (2018) found that on average, women in the M-Pawa group saved three times more money weekly than women in the control group, while those in the M-Pawa plus business training group saved close to five times more. Business training was effective in increasing women’s use of good business practices. The largest and significant impacts were increased use of record keeping (up 32 percent) and financial planning (up 25 percent) relative to the control group. a. https://docs.gatesfoundation.org/Documents/ImpactofMobileMoneyonPoverty_ResearchBrief.pdf develop schemes for susu groups. For example, in 2011 the Central Bank of Ghana introduced new re- quirements for the licensing and management of susu companies. In response to this Fidelity bank launched a value-added service to the susu companies that helps them manage fraud risk, reduce col- lection costs, and automate their reporting, and in return Fidelity gets access to a cheap source of funds. The Fidelity susu solution involves a point of sale (POS) device (susu collectors carry on their rounds). When customers make their deposits, the POS device prints a receipt for the customer and transmits the information back to the susu company’s home office MIS. Susu collections staff found the POS device very easy to use and saved significant time as no paper reconciliation was required.32 32. Delivering Technology Solutions to Susu Collectors (cgap.org). Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  39 Potential of a bank-led m-savings model for the urban informal Among the nine banks, only two serve poor or vulnerable clients.33 Most banks in the Liberian context focus on middle and large-scale commercial customers. Access Bank and Ecobank are widely known among informal sector workers and have a physical presence and have designed products for low-in- come clients. Access Bank was formed to service Small and Medium Size Businesses (SMSB) in Liberia and lend to individuals. It is also known as a microfinance bank.34 Ecobank provides savings products to cus- tomers and, in the consultations, shared that it had piloted a micro-saving scheme for informal sector workers. The rest of this sub-section assesses these banks along the five essential functions. Outreach Access Bank and Ecobank have more branches than other banks in Liberia. Ecobank currently has nine branches, over 38 ATMs (Xpress Points), and 112 points of sale (POS) servicing customers nationwide, mak- ing it the bank with the highest number of branches in the country. It also has over 200 agent locations to deliver banking services.35 In Montserrado County, Access Bank has six branches in densely populated areas, including Sinkor, Duala, Elwa, Gardnersville, Johnson, and Red-Light. Access Bank ranks second in highest number of branches in the country. Both banks’ large footprint means they are more accessible to informal sector workers in Liberia. Access Bank and Ecobank are innovative in the mediums they use to engage their customer base. Ecobank uses the radio, website, Facebook, and Instagram accounts to reach customers. The bank’s social media presence reaches more than 6000 customers regularly. They use social media platforms to provide information to customers, including the sale of new products and financial literacy lessons. Ecobank is more active on social media than Access Bank, with postings including training and product sales for Smartphone and USSD36 customers.37 This is a distinct advantage, as many poor and vulnerable Liberians are more likely to be USSD customers. Although Access Bank does not enjoy the same social media pres- ence as Ecobank, it reaches out to customers in other ways. Access Bank focuses on small businesses, including informal sector businesses and susus. The bank has dedicated call centers that regularly engage with customers by selling new products, following up on payments, and answering customer questions. During stakeholders consultations with banks, Access Bank representatives noted that the call centers had been particularly successful as people appreciated speaking to a customer service representative and sharing their concerns. This improved customer confidence and trust. Record-keeping platform: All banks, by the nature of their business, have record-keeping platform needed to manage individual-account based, easy to track, m-saving schemes appropriate for informal sector workers. Banks also have platforms allowing users to hold multiple accounts in their institutions. 33. The Bank consultations included Access Bank, Eco Bank and LBDI. 34. About. (n.d.). Retrieved October 7, 2022, from https://www.accessbank.com.lr/sections/pages/our-corporate-value. 35. Ecobank—Ecobank Online. (n.d.). Retrieved October 3, 2022, from https://ecobank.com/lr/personal-banking/ways-to-bank/ ecobank-online. 36. USSD (Unstructured Supplementary Service Data) is a Global System for Mobile Communications (GSM) protocol used to send text messages. USSD applications run on the network, not on a user’s device. As such, they don’t have to be installed on the user’s phone, and don’t require internet access and smartphone functionality, which is an advantage for users with feature phones with limited storage space. 37. Ecobank-Liberia post (n.d.). Retrieved October 1, 2022, from https://www.facebook.com/EcobankLiberiaLimited/posts/. 40  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector This is useful for those customers who use various banking products, including timed savings (similar to Certificate of FIGURE 37: Innovative mediums by banks to engage with customers: Call center of Access Bank Deposits) with different withdrawal rules and interest rates, and USSD focus of EcoBank to meet various savings needs. Access Bank and EcoBank are no exception and have systems to assist with record keeping. The banks are among those trusted in the Liberian financial sector, given they have no regulatory infractions. Contribution collection: Contribution collection for m-saving schemes must in‑ volve multiple mediums, at least at the inception stage. This is because a digital account, albeit cost-effective, may not be the preferred choice for individuals in the informal sector. Those comfortable with saving digitally might still want to pay in person to test if their money is in safe hands- after all this group is used to handing out their savings to a susu man. The contribution collection mechanism should leverage digital means (like using mobile money) to make saving easy and cost-effective and supplement it with in- person interaction (like collection by agents, walk in clinics, representation in community meetings)—a strategy also referred to as ‘tech with touch.’ Such an approach, being adopted by schemes in Rwanda and Kenya can especially be useful in initial stages of scheme roll out when familiarity and trust with the scheme is only beginning. Such a strategy can also help ensure persistence of savings. Ecobank’s presence via agents and offices enhances cus‑ tomers’ ability to reach them. Currently, the bank uses both walk-ins, Xpress Point (ATMs), and payment through mobile app to receive customer deposits (see Figure 38 for payment using EcoBank’s mobile app). In the stakeholders consultation for Banks, the Eco Bank representative said Source: Facebook. that “the use of mobile money for transactions remains limited due to push and pull glitches and the (perceived) high transaction fees.” Given the challenges with digital savings, Ecobank created more Xpress points38 so customers do not stand in long lines at branch locations. Currently the Xpress points are still limited relative to the size of the uncovered population and are mainly located in more economically affluent communities. This poses a challenge unless digital means of saving were to supplement the Xpress point for contribution collection. EcoBank also takes seriously the mantra of “meet the client where you find them.” For example, it has created “windows of deposit-taking” in certain schools and hospitals to facili- tate contribution collection. 38. ATMs are referred to as Xpress points in Liberia. Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  41 FIGURE 38: Payment using EcoBank’s mobile app Source: Facebook. Access Bank emphasizes attention to informal sector workers via deposits and payments through walk-ins to bank branches or their agents. The bank’s field agents collect payments from borrowers/ businesses, record payments, and make deposits on their behalf. The Access Bank representative noted that the business strategy was geared toward “lending to informal sector workers, and they do so more than any other bank in Liberia.” Access Bank’s personal savings scheme also attracted informal sector workers, but customers who took loans from the bank would hesitate to use their savings account be- cause they feared that if they defaulted on a loan or missed a payment, the bank would seize their sav- ings. The representative of Access Bank noted that they were focusing on financial literacy and rights training to inform the informal sector workers that their saving are protected and that having savings increases their ability to qualify for credit. It appears that Access Bank has invested in understanding the concerns of the target groups. They also reported registering some susus and VSLA groups. Withdrawals The nature of their businesses enables both banks to process withdrawals. The access and experience of the withdrawal process cause frustration among informal sector workers, as documented in the findings 42  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector from LSNA (2022) in Section 2. Both banks currently use walk-ins and mobile money for customer pay- ments and withdrawals. There are three specific challenges from the perspective of an informal sector worker. First, there are long lines at bank locations which discourage customers. Second, there are limited cash-out points to serve all of urban Liberia. Even with their combined resources, Access Bank and Eco- bank still have only 15 branches, 38 ATMs (Xpress Points), and 112 points of sale. Third, despite the foray into mobile money, the technical glitches and high transaction costs have limited the banks’ ability to take full advantage of the benefits of digital savings. Under the status quo, an informal sector worker who saves with select banks would incur travel and wait times that add up to half a day and mean lost revenue or wages. Innovative partnerships with trusted stakeholders like telcos, market associations, or credit unions could unlock new opportunities for all. Oversight Access Bank and Ecobank are supervised by the CBL, as are all banks in Liberia. Both are rated in good regulatory standing by CBL (FIU 2021), so they can take deposits, provide loans, execute withdrawals through various means, and engage in digital transactions, including mobile money transactions. In addi- tion to the CBL, the Financial Intelligence Unit (FIU) provides oversight of the banking sector in Liberia. While the CBL oversees daily liquidity, transactions, and other banking reporting, the FIU offers regula- tory oversight on transactions, consumer protections, and so forth. Together, the CBL and FIU provide oversight consistent with international standards, which are enforced. Most recently, the FIU fined a bank LRD 500,000 (FIU 2021) for failing to report gaming transactions and organization violations. This indicates that participants in an m-saving program under a bank-led model will have their savings safe, secure, and well-regulated. Readiness of a telco-led model Two major telecom (telcos) companies in Liberia illustrate these institutions’ potential and chal‑ lenges to offer an m-saving scheme. Lonestar Cell MTN Liberia and Orange operate nationwide but predominately in urban Liberia. The two companies provide mobile money services and have the techni- cal capabilities to offer a digital saving account, a customer base, and agent networks to onboard infor- mal sector workers. Multiple estimates suggest that mobile connections and network reach is growing in Liberia. According to Lonestar’s estimates their network “covers 90 percent of Liberia”39 and serves 1.6 million customers (or about 31 percent of the population). As per some reports40 there are 4.12 total mobile connections in Liberia as of January 2020, an increase of 995,000 connections since 2019. While many of these connec- tions are unlikely to be smartphone users, they could still use mobile money. The Unstructured Supple- mentary Service Data (USSD) allows customers without smartphones also to make digital money trans- fers. USSD short code is issued by the Liberia Telecommunications Authority (LTA), enabling customers to connect directly to the telecom provider without needing internet service or a Smart Card. This means that poor informal sector workers who are unlikely to be smartphone users or have stable inter- net connections can also avail of digital saving methods, should they be offered. 39. https://lonestarcell.com/ceo-message/. 40. https://datareportal.com/reports/digital-2020-liberia. Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  43 Three fintech companies in Liberia—TipMe Liberia, E-Wallie, and KanaCash Liberia—are licensed as Pay- ment Service Providers. The fintech firms can provide mobile financial services like the telcos but lack the USSD short codes that the telcos own. Since informal sector workers are more likely to use USSD codes for saving, we do not include fintech in the readiness assessment. Outreach High mobile money usage in Liberia and policy regulations focused on improving digital financial services makes outreach through telcos promising and cost-effective. The two telcos in Liberia have made mobile financial services a key area of their business focus. This is unsurprising given that mobile financial services are rising across Sub-Saharan Africa (SSA). Per the GSMA report (2021), digital payments and transactions, including mobile money, grow more than 15 percent yearly in SSA (GSMA 2021). Specifi- cally, the mobile money transaction volume in Liberia has increased significantly in the last five years- from a little over 500,000 in 2018 to approximately 45 million by 2020 (CBL 2019b: 73; CBL 2021: 85). The CBL’s removal of charges for person-to-person (P2P) transfers has also encouraged digital transactions through mobile money.41 Banks now require customers to sign up for mobile money at account opening and need mobile money accounts to withdraw above a certain level, further fueling the uptake of mobile money. Features such as Push-and-Pull, where customers can move funds from bank accounts to mobile wallets and vice versa, have also contributed to the rise in mobile money payments and use. Together, these changes are expected to increase the mobile money customer base, a positive outlook for a telco- led m-saving scheme. A growing agent network has accompanied an increase in mobile money usage. The “tech with touch” motto is being adopted by telcos whereby more mobile money transactions are accompanied by hiring more agents and opening cash-out centers/points of sale. The benefit of the “tech with touch” business strategy is that it introduces digital technology (mobile money) while still prioritizing customer service by using agent networks, walk-ins, and pop-up stores, to help individuals feel comfortable using this new technology, asking for help when needed, and over time learn to trust and use this service indepen- dently. Lonestar and Orange combined have over 25,000 agents and 2,000 merchants in their network (CBL 2021). These agents and merchants are predominately located in urban Liberia, which makes a telco- led m-Saving scheme attractive in reaching urban informal sector customers. The LSNA (2022) survey also finds high rates of usage, access, trust, and familiarity of telcos among urban informal Liberians. Key informant interviews revealed that the telco merchants and mobile money agents also live in the same neighborhoods as their customers in the informal sector, making it easier for the target group to deal with them. Users mostly find that telcos are honest and charge reasonable rates. There are some reports of agents charging higher fees than stipulated. In the stakeholder consultations with Lonestar and Orange, both mentioned they are taking steps to crack down on agents who charge higher prices. However, as shown in Section 2, among those with a mobile money account, 65 percent said they do not think the 41. Liberia—trade financing. Retrieved September 21, 2022, from https://www.trade.gov/country-commercial-guides/liberia-trade- financing. 44  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector FIGURE 39: Orange and Lonestar (MTN) MoMo booths in Liberia Source: Orange.com. Source: Mtn.com. agent overcharges them, 9 percent said all agents overcharge, and 26 percent felt that some agents over- charge. These results point to the telcos’ successful efforts, which should be continued. Record-keeping platform Telcos can maintain unique records of individuals but, given their different roles compared to banks, they do not store and analyze records similarly. Regulatory constraints and data privacy laws also pre- vent them from collecting detailed customer information. While telcos have the technical capacity to maintain records, run quality checks, process crediting of funds and withdrawals, ensure the uniqueness of records, and so forth, they are currently restricted in their ability to use this platform for saving needs because of the policy regulation. Contribution collection Among all potential stakeholders who can be considered for an m-saving scheme, telcos have the highest presence within the informal sector. The two telcos in Liberia have a combined active sub- scriber base of over 1.3 million (CBL 2021: 87) and an agent network of about 50,000 nationwide, with a higher presence in urban Liberia (CBL 2021). This means they are best suited to offer diverse options in the “tech with touch” domain. They can do so without hiring additional personnel and by merely training their existing agents to collect contributions and teach customers how to save digitally. Withdrawals Similar to contribution collection, telcos are best suited to facilitate easy withdrawals. Immediate access to funds and ability to track savings is important to build trust in a saving scheme. Telcos currently have payment capabilities which allow person-to-person (P2P) transfers, points of sale (POS) for cash out, and person to business (P2B) payments when they must pay utility bills, school fees or airtime. With these tried and tested payment capabilities, telcos already have an advantage in rolling out a saving scheme. To realize this vision of a scheme integrated across Liberia’s financial and social protection Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  45 landscape, G2P and P2G payments will also need to be part of the payment capabilities. Lonestar is al- ready showing interest in integrating across institutions by partnering with major banks nationwide to provide a push-and-pull service to its customers. Through this service customers can quickly transfer money from their bank account to their mobile money wallets or vice versa. Similarly, Orange Money has partnered with UBA, Ecobank, LBDI, and GT Bank to provide a bank account to mobile wallets or wallets to bank account transfer services.42 With the capacity to move funds between participants’ bank ac- counts and mobile wallets, telcos can track savings deposits and withdrawals but are restricted from offering these products themselves. Regulation and oversight CBL has approved both Lonestar and Orange as payment service providers (PSP) in Liberia, including mobile money services. Per CBL Mobile money regulation, “Regulations No. CBL/RSD/2019 concerning the Licensing and Operations of Electronic Payment (e-Payment) Services,”43 PSPs are prohibited from deposit-taking. Consequently, both telcos are not allowed to offer savings services to customers in Li- beria though Lonestar shared during the consultations that they are making a case to CBL to allow them to offer saving products in Liberia. Consultations with CBL confirmed that PSPs are currently not allowed to offer saving products, but CBL might review the decision if a business case and need to the economy was illustrated. Readiness of a hybrid model—banks and telco led The readiness assessment of a bank-led or telco-led model has revealed that both have some unique advantages while a combination could result in a saving scheme that can have a multiplier effect regarding its scale, innovation, and impact. The hybrid model—where banks and telcos partner to provide m-savings schemes—allows for the responsibility of a safe, secure, and prudent investment strategy to rest on the heavily-regulated financial sector while also bringing dynamism through the telcos who have a wide reach, are agile, have digital capabilities and are easily accessible by the informal sector. From a technical perspective banks and telcos are already interoperable so this approach does not re- quire much business process re-engineering. Instead, most of the innovation would be in an agreement on the design of the scheme, the outreach strategy, and the incentives to be offered, for example. A hybrid model that combines the capabilities of banks and mobile money providers has been suc‑ cessful in other countries. M-Pesa, the Kenyan mobile money provider, launched M-Shwari, revolution- izing micro-savings and loans in Kenya. Similarly, Orange Bank Africa combined capabilities with Orange Money to launch a micro-saving scheme called Tik Tak Savings. Banks, licensed in Côte d’Ivoire and other West African countries, leveraged Orange Money’s customer base to deploy the service. Orange Bank integrated the savings products into their app and USSD menu, providing customers with a seamless digital journey, allowing them to borrow as little as US$9. As of 2020—within one year of initiating the scheme—the Orange Bank Africa savings scheme had enabled 61,000 customers to open a savings ac- count using their Orange Money account (GSMA 2021). 42. Services. (n.d.). Retrieved October 2, 2022, from https://www.orange.com.lr/en/orange-money-services.html. 43. Regulations. (n.d.). Retrieved October 1, 2022, from https://www.cbl.org.lr/index.php/publications/document-type/regulations. 46  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Outreach The outreach capabilities under the hybrid model would be unmatched with the banks, bringing in over 38 ATMs and 112 POS deployed nationally and telcos with their 50,000 subscribers and over 25,000 mo- bile money agents and merchants. The tech with touch model, which has proven to be a successful principle to attract informal sector workers, can be implemented more strongly under the hybrid model. Bank staff are equipped to provide financial literacy, nudge workers to save, explain to them the risks of myopia, and explain the benefits of compounding if individuals save early, among other services. Telco agents don’t have these human resources capabilities, but they understand the informal sector worker and are in close contact with many. A hybrid model can also lead to cross-fertilization of human resource capabilities and in devising strategies and communication material that merge the knowledge and experience. Record-keeping platform, contribution collection, and withdrawals The record keeping, contribution collection and withdrawal (MIS) functions can be structured such that banks manage and monitor participants’ accounts, while telcos manage mobile money collections and withdrawals. In this scenario, the telcos can overcome the CBL regulation prohibiting deposit taking for mobile money providers. Currently the push-and-pull service allows banks’ customers to link their ac- counts with the telco platform and move money between their mobile wallet and bank account or vice versa. This requires customers to open a separate bank account and sign up for a mobile money wallet with the telcos. In a hybrid version, customers could sign up on the mobile money platform and open a savings account on the mobile money platform. This will allow customers to register quickly and begin saving right away In sum, neither banks nor telcos are perfectly equipped to provide the essential functions of a digi‑ tal, individual-based saving scheme that can be offered to informal sector workers, but a partner‑ ship may be feasible. Each institutional led model has pros and cons, as summarized in Table 3. While an m-saving approach is an individual saving scheme, the same functions hold true if a viable susu group would like to access formal financial markets and make it easy and secure for their members to save, track, earn interest, and withdraw based on pre-set rules. Section 3: Institutional Readiness to Deliver Accessible, Convenient, and Safe Micro-savings n  47 TABLE 3: Pros and cons of different institutional models for a m-saving scheme Model (facilitator) Key stakeholders Advantages Disadvantages Bank-led • Mobile money • Access to ATMs, POS terminals, and • Limited numbers of branches to service target model providers (telcos) branches for participants’ walk-ins population; long wait times • Informal sector • Access to other banking products • Informal sector lack of trust in formal banking workers • Digital capabilities to integrate with 3rd sector • GoL parties • CBL • Offer savings products • Scheme participants Telcos/ • Telcos • Large agents and merchants’ network • Lack of regulatory approval for deposit-taking fintech-led • GoL • Proximity to informal sector workers • CBL may deny special authorization model • CBL • Ability to process digital savings • Participants Hybrid: • Telcos • Extensive agents and merchants’ network • Requires a business case to be made at the bank banks and • Banks • Removes regulatory prohibition and and telco level telco-led • CBL allows deposit taking • Never been implemented in Liberia and may model • Participants • Provides options for digital and branch require additional stakeholder consultations, walk-in transactions including with CBL, to discuss any distortionary • Proximity to informal sector workers market impact (or concentration of market share in the hands of few) Source: Authors’ compilation. 48  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector SECTION 4 Policy Recommendations The LSNA (2022) survey results, supplemented with consultations and key informant interviews, have been used to understand the unmet needs of poor and vulnerable Liberians. Through five key research questions, this report presents to readers findings on saving behavior, needs, and aspirations of this group. The report’s findings align with the financial inclusion literature: the poor population saves and depends mainly on informal saving groups but aspires to some benefits afforded to those who can save with formal financial institutions. Savings in the informal sector purportedly allowed LSNA survey respondents to invest in their household enterprises and build resilience in the face of financial shocks. Access to mobile money significantly increased the likelihood of saving among the urban informal poor, aligning with the more general literature that finds integrating digital technology into savings products increases their adoption. As per key informant interviews, informal saving group members believe their groups can scale up if they connect to formal financial institutions. In terms of program design, the study finds that the urban poor in Liberia prefer flexibility in access to funds, monetary incentives (even if mini- mal), and a commitment mechanism similar to group saving. Overall, the results of LSNA, supplemented by interviews, reveal that informal saving meets some critical needs of the target population. Still, there are unmet needs and an aspiration that opportunities can be unlocked if respondents receive some benefits similar to those who save in formal financial institutions. These insights, combined with the light touch institutional readiness assessment, have formed the basis for the policy recommendations in this concluding section. The objective of these recommendations is for policy makers to strengthen and, in doing so, protect saving instruments currently used by this group and simultaneously leverage advances in mobile money to facilitate a micro-saving scheme to serve the unmet needs of urban informal Liberians. Section 4: Policy Recommendations n  49 Recommendation 1: Support viable susus to sustain and scale themselves by documenting them and leveraging digital technology to connect them to the financial ecosystem. A database on susus will allow governments and practitioners to strengthen these susus and even‑ tually link them with formal financial institutions. Currently, there is no database in Liberia or a nation- ally representative sample that can shed light on the number of susus, composition of members, average savings, outstanding loans, location, or status (active, dormant, closed). Establishing such a database will allow for the evaluation of susus’ ability to address the saving needs of the informal sector and compare it against alternate modes of saving, such as hybrid m-savings schemes offered in partnership with telcos and banks. In the consultations with the Central Bank of Liberia, counterparts noted that creating a na- tional database on susus would be a promising initiative. However, they recognized that the informal nature of these groups makes this task difficult. The Government of Liberia can strengthen susus by establishing an administrative link with them. A phased approach to registering susus can begin with the larger susus with over 30 individuals that have been active for at least five years. A small incentive (for example, a flat registration credit to all members) can be provided during registration to make it attractive for susus to register. The registration process needs to be extremely simple and can be done on-site for individuals in any government program. The administrative link, once established, will serve not only as a venue to channel resources but could also be used to provide much-needed technical and financial awareness support. In India, a similar approach was used to develop an administrative link with self-help groups (SHG) for women. In 1991, the National Bank for Agriculture and Rural Development (NABARD) began a simple registration process for SHGs and linked these to banks across India to provide timely and cheap credit to these groups. Over the years, these SHGs have benefitted from government programs that could channel resources directly to these SHGs based on the needs assessment. As of 2015, there were about 7.3 million SHGs whose records were available, and an attempt is being made to digitize them and collect their members’ Aadhaar (India’s unique ID) details. This move was aimed at helping banks access records of SHGs in real time to reduce lending risks (Nair 2015). The digitization will allow banks to access informa- tion on credit history records of their members and meetings and weed out defaulters and those in multiple groups. Once registered, additional services can be provided to susus. Consultations revealed that susus need MIS systems that simplify account tracking. These groups can also benefit from regular financial training. Delivering this support will be much cheaper for the government once susus nationwide are part of a database. In times of crisis, aid relief can also be channeled through these groups based on an objective set of criteria, such as average saving or loan amounts of susu groups. The objective of registering susus must be clarified by the government, and a trusted institution or stakeholder must be entrusted with this responsibility. Once registration of susus is complete, the government can broker a link between formal and infor‑ mal saving platforms. Specifically, the data of active susus can be shared with MFIs or smaller banks (for 50  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector example, Access Bank, EcoBank) with the consent of the former. In supporting and scaling up viable susus, a saving group with deep roots in the community and culture of Liberia, the poorest and most vulnerable Liberians could access some of the benefits mainly reserved for individuals in the formal sector. Future work on improving the financial resilience of the informal poor in Liberia could focus on a deep dive into the regulatory environment, consider a governance arrangement of susus, and de‑ velop a strategy to create a database of the medium and large susu groups. Doing so will provide security to these individuals and will also be a platform for the government to support the needy in times of shock and utilize savings for domestic resource mobilization in a prudent manner. A governance arrangement by the Central Bank (for example, the 2011 initiative by the Central Bank of Ghana (Michaels 2012)) would serve as a guide for the private sector to develop schemes for susu groups. Recommendation 2: Improve the target population’s financial literacy and inclusion. A range of interventions successfully employed in other countries could be effective in the Liberian context. Section 2 highlighted financial literacy and inclusion’s positive and significant impact on the demand to save. The challenge with financial literacy, especially with the poorest and most vulnerable, relates to the general low literacy levels and (sometimes) a lack of an appreciation for how the training immediately impacts their lives. Financial inclusion training, workshops, and the provision of low-cost cell phones have facilitated the education of individuals in basic financial literacy and business skills. Financial literacy training should be delivered sequentially and in bite-size chunks. It should start with teaching basic savings features and gradually introduce technical concepts like compounding and financial management skills (Berfond et al. 2019: 15). Customers need to be equipped to counter fraud and understand digital risks, including how to report grievances. Traditional financial education has been shown to have a limited impact on transferring knowledge and changing behavior. Some of the more successful inter- ventions combine technology and human touch and take an approach that provides ‘edutainment’; for example, chatbots are a nascent tool tested as a scalable technology with a human-like touch. Providing simple rules of thumb has also been effective in improving financial capability (Cole and Schoar 2016). Susus can play a role in offering financial training. Notable examples of successful training include fi- nancial/digital literacy intervention in SHG models. Holvoet (2005) found a positive and considerable impact of economic empowerment when SHGs provided financial literacy training and financial services. The SHG programs with a training component have a greater impact and effect size on women’s empow- erment than SHG programs without a training element. The goal of these financial trainings is not to create financial experts; it is to equip individuals with sufficient knowledge to make sense of financial activities, seek out the appropriate information, ask relevant questions, and understand and interpret the information (Kefela 2011). Group structures like SHGs provide individuals with social support networks and harness the power of cooperative learning. This cooperative learning mode produces greater achievement, more positive attitudes towards learning, and enhances how the group feels about each other. Mixed-capacity groups may help transfer knowledge, although it is unclear if single-sex groups or mixed groups are more effective. Section 4: Policy Recommendations n  51 Social programs can be a venue to increase (digital) financial inclusion of the urban poor. Notable among these efforts in Liberia were the digital payments to all safety net beneficiaries under the emer- gency Social Cash Transfer program during COVID-19. It is important to ensure that mandates on using mobile money for receiving cash transfers do not exclude those most vulnerable including women, the poorest of the poor, and the disabled—all of whom have lower financial inclusion than the average population. Nor should mandates give rise to additional challenges (for example, individuals not being able to cash out money due to limited POS). However, once grievance redressal mechanisms are imple- mented, efforts to nudge and train people to use digital methods can pay dividends. Once a substantial number of individuals in the economy use digital modes to transact and save, the digital economy can grow in leaps and bounds. Recommendation 3: Continue investments in foundational systems, including expanding ID coverage, improving payment systems, and building interoperability between social protection programs and saving schemes. Government investments in foundational systems like the NIR in Liberia must be implemented across Liberia so existing and new schemes can plug into the foundational system, check identity in real-time, pool administrative resources, and avoid errors. In being able to do so, the cost of offering saving schemes will be reduced, and trust in the scheme will improve. It would also enable the govern- ment of Liberia to receive real-time data on the savings behavior of the informal economy and channel resources to those in need during an economic shock. Liberia is already making rapid advances in payment systems propelled by private sector investments, but government support can generate spillover effects, ensure equity in access, and promote mul‑ tiple usages of payment systems. If designed correctly, digital payment methods can be associated with efficiency gains and encourage transparency and client satisfaction. Lindert et al. (2020), for instance, suggest that the use of a swipe card and agent banking to transfer social payments in the Bolsa Familia social welfare program to over 12.4 million beneficiaries across Brazil reduced the administrative costs from 14.7 percent to 2.4 percent of the total grant value. In South Africa, the administrative costs of delivering social transfers for the South African Social Security Agency were cut by 54 percent when the payments were rerouted through commercial bank accounts accessible through debit cards (Iazzolino 2018). An appropriately designed payment system can serve as an entry point for financial inclusion and access to various financial services for informal sector workers (Guven et al. 2021). The payment infra- structure created to support G2P payments can also support P2G payments, thereby leveraging existing infrastructure to allow individuals to pay contributions to a national-level scheme. Alongside discussing design aspects of new saving schemes, the Government of Liberia should prioritize its commitment to implementing NIR and support expanding digital financial and payment services. These are key to unlock- ing any saving scheme’s scalability for informal sector workers. Lastly, alongside strengthening founda- tional systems and expanding social registry coverage, the government should focus on interoperability between social protection programs and saving schemes, which will ensure a continuum of coverage. For 52  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector example, safety net or public work beneficiaries with access to a low-cost digital saving scheme could begin saving, accrue interest, and use it for productive purposes. The government could provide targeted incentives to enable these individuals to save and build their financial resilience. Over time, additional benefits like short-term insurance and even pensions could be offered to these groups as their dispos- able incomes grow (Figure 40). Recommendation 4: Clarify policy so that the private sector and civil society can effectively partner in meeting the informal sector’s saving needs. The National Financial Inclusion Strategy (2020–2024) has a bold vision to “build a sustainable financial sector deeply rooted in digital financial services to provide access to and enhance the usage of a wide range of affordable financial services” (CBL 2019b). Achieving this vision will require partnership with the private sector and designing schemes that meet the needs of the informal sector. The Central Bank of Liberia will need to communicate its policy direction to all stakeholders and ensure that any exception granted to private sector firms follows a transparent and impartial decision-making process. Doing so can enhance the private sector’s interest to participate and innovate. International experience of countries with similar contexts, like Sierra Leone and Côte d’Ivoire that face similar policy dilemmas, and ones like Kenya and Nigeria that have successfully navigated such transitions, should be prioritized. Liberian regula- tors and policy makers could benefit from this knowledge-sharing and fine-tune regulations that balance Liberian policy objectives with the welfare of the people, especially those most vulnerable. FIGURE 40: Social protection instruments across the income spectrum Source: Guven and Karlen 2020. Section 4: Policy Recommendations n  53 Public-private partnerships with the common objective of addressing the poorest’s barriers can unlock new saving opportunities. Kenya is a notable example where the success of M-pesa (a service offered by Safaricom and Vodafone) has led the country to transition rapidly into a digital economy. Regulatory support to M-pesa during its initial years played a crucial role in its rapid expansion In Kenya. The micro-saving product M-Kesho gained popularity as it requires no fees for opening, no minimum balance, and interest rates ranging from 0.5 percent to 3 percent per year, remaining constant at 3 percent when the balance reaches KES 10,000 (Mbiti and Weil 2011). A study on the use of M-Pesa found that it effectively diminished the need for other saving options and caused a reduction in “secret hiding places” (Kwena and Turner 2013). Khandker (2000) studied a voluntary saving scheme launched by BRI (Bank Rakyat Indonesia) in Indonesia under SIMPEDES. The study found that, due to this scheme, more than 16 million households saved approximately US$184 on average in 1996. Aportela (1999) studied a similar scheme in Mexico, Pahnal, and found that it led to a 5 percent increase in the average household savings and a 7 percent increase in disadvantaged household savings. Currently, Liberia faces regulatory uncer- tainties (see recommendation 4), but as these challenges are resolved, the private sector could lead the delivery aspects of the saving scheme and introduce innovative design features, benefitting from their insights on customer preferences. Recommendation 5: Pilot a digital-based saving scheme based on findings from LSNA and evaluate the scheme to finetune design, delivery, and incentives. A voluntary micro-savings scheme that offers matching government contributions to incentivize savings, leverages digital innovation, and is built on a sound institutional framework can be part of Liberia’s flexible social protection tools. A 3–4 year pilot in Liberia could help to identify the design of an m-saving program that best suits the Liberian context.44 It would allow for rigorous testing of the at- tractiveness of different design features (interest rate, incentives), identify operational challenges (use, access, and trust issues with digital saving; challenges with registration), and explore partnerships (with telcos, existing susu clubs).45 As found in the LSNA (2022) survey, diversity in saving behavior and prefer- ences exists even among the urban poor. So, one saving design may not meet the needs of this target group all the time. Designing a pilot with multiple treatment interventions could be the first step in identifying scalable and sustainable solutions that the target groups also desire. Other countries are launching similar pilots. For example, Pakistan’s short-term saving option (Hybrid Social Protection Scheme) with government matching is offered to graduating safety net women beneficiaries.46 In Kenya, the social insurance institution (through the Haba Haba scheme) offers short- and long-term saving op- tions to informal sector workers and health insurance and data packs as incentives. 44. To provide adequate data to draw operational lessons, the pilot would need to operate for 3–4 years. 45. Key questions a pilot could answer include whether an m-saving scheme crowds out savings from group savings, if it is preferred over group savings, does it complement group savings, and does it attract individuals who might not be as willing to save in a group due to privacy and flexibility issues. In the early stages, understanding the barriers that prevent low-income informal sector work- ers from contributing will be important. 46. A World Bank project—Crisis Resilient Social Protection (CRISP)—is supporting this initiative. 54  n   Understanding the (Un)met Saving Needs of Poor Urban Liberians in the Informal Sector Liberia could consider two options for a m-savings pilot. One pilot could test digitally linking viable susus to a bank account. The first step would be to identify viable susus. The criteria might be susus groups with over 30 people and in existence for at minimum five years in select communities. They would be required to document their scheme rules, eligibility conditions, withdrawal, fines, and so forth. The second step would be to digitally link the viable susu groups to participating banks in partnership with a telecom provider. The account of a susu group would be opened. Savings would be pooled and parked in those accounts. The savings would be extended as loans to susu members per the rules of the susu group submitted to the bank and telco. A second pilot could auto-enroll into an m-saving scheme for individuals who are participating in other government programs to test if they save/save more under certain conditions. The first step would be to auto-enroll beneficiaries of a government program into a digital micro-saving account. The mobile money account would be designed to be easy, convenient, and secure with a bank account at the back end so that savings are feasible. The second step would be to provide monetary (interest pay- ments, waiver of transaction fees, matching when they meet a minimum level of savings, an option to pick their insurance bundles) and non-monetary nudges (confirmation when they save, when interest is credited, or money is withdrawn) to incentivize them to save. Financial training would be provided to all pilot beneficiaries. Individuals would be tracked for six months to a year, and their saving behavior, level, and frequency of savings would be monitored, and household welfare outcomes evaluated. In addition to testing different design options, subsequent pilots can explore default monthly saving options and registration via trusted aggregators like associations, trade unions, faith-based groups, and so forth. The type of incentive and degree of state support can also be varied to choose a cost-effective fiscal incen- tive. Differences in behavior by age and gender should be explored in these assessments. The results of the pilots could inform the government strategy to empower savings among the poor‑ est and most vulnerable informal sector workers in urban Liberia. While international experience has useful lessons for Liberia, it is important to pilot the scheme and tailor the design, delivery, and incen- tives to meet the needs of the urban poor Liberian population. Learnings from the same would also have spillover benefits to the remaining informal sector workers, who are likely to have a higher ability to save than the target group. This policy report is the first in the Liberian context to look at the saving behavior of poor and vulnerable urban Liberians, exploring their perceptions of formal versus informal saving and group versus individual saving. Questions in the LSNA (2022) survey aimed at answering the key research questions and under- standing new concepts in the financial inclusion literature like who the poor trust with their savings; what features in saving schemes they desire; and how, in a rapidly digitizing world do these individuals perceive saving using digital methods. The urban poor do save, even in Liberia, and promoting these savings can help build resilience and unlock opportunities for this group for better livelihoods and human capital development. 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