Details of savings, credit and insurance products can determine their success and failure—sometimes in surprising ways. The idea that the poor can save still seems surprising to many. But evidence increasingly shows that poor households can save, want to save, and do save, but they often do so in the informal sector. Insights from behavioral economics is opening doors to new innovations that can facilitate saving and build on understandings of what informal devices do well. Microfinance started as microcredit, with a strong emphasis on lending to grow small businesses. Today, credit is viewed as just one part of a portfolio of financial services desired by poor households, and the innovations, like frequent installment payment schemes, that make microcredit work are better understood. Group lending has been joined by other mechanisms that have proven to be equally as important. The poor not only have less income on average, but tend to face greater risk than better off households. Much energy and effort is put toward coping with risk, and new innovations are providing workable solutions and also clarifying constraints.
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