Page 159 - Special Topic Session (STS) - Volume 1

STS422 Robin G. et al.
demonstrates that older adults have a signifcantly higher proportion of
passive accounts than youth across most provinces of Cambodia.
Among the key reasons for the large proportion of passive savings account
are: customers’ limited awareness of savings opportunities; low financial
literacy; limited access points in rural areas; and the attractiveness and
convenience of informal savings.
For example, nearly 60 percent of adults are unaware of formal saving
methods, 54 percent cannot reach a bank within 30 minutes, and 33 percent
of the adult population saves informally. Moreover only 10 percent of the
people save to engage in business or farming activities, indicating that these
activities deliver higher returns than savings in the bank (UNCDF Finscope
2015).
On the supply side, credit-linked savings accounts are often opened
merely to function as repayment vehicles for loans. In addition, staff and
customer incentive systems are geared towards improving savings access and
not savings usage. Savings products are not linked to regular income streams,
such as wages and pensions. In fact, 92 percent of people receive their income
in cash, rather than directly into their bank account and it remains challenging
for depositors to make payments or transfer remittance from their savings
accounts, especially in rural areas.
On the credit side, survival analysis finds that customers have a limited
borrowing relationship with FSPs; 39 percent of the borrowers exited the loan
programme after the first year and 78 percent of borrowers exited within three
years. Women, youth and rural customers are more loyal borrowers, yet they
receive lower individual loans than men and older adults respectively. We also
find strong differences in exit rates among FSPs, varying as much as 24 percent
between the top performing and the weakest performing FSP, which indicate
that borrower exit is at least partly under the control of the FSP and not just
an issue of competition and market saturation (Mimosa, 2016). In some cases,
borrowers may exit because they have become financially self-sufficient and
do not require further loans. However, high exit rates also suggest that loan
products are not tailored to the needs of borrowers (Churchill, C., and S.
Halpern 2001; Copestake 2002 ).
There is a business case for FSPs to strengthen customer journeys,
especially among women and youth. Depositors staying for five years with
FSPs saved nearly 4.5 times more than the level of their average opening
balances ($174 compared with $820 in savings account balances) and 1.8
times more than short-term depositors staying for a year ($453 compared with
$820). Long-term borrowers who stayed with the FSP for three years also took
up slightly larger loans ($613) compared with those who stay with the FSP for
one year ($521). We estimate that reducing the number of passive savings
accounts by between 10 percent and 30 percent, would mobilize an additional

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