Do you think piggy banks have gone obsolete? With the rise of cashless transactions and digital currency, it's true that piggy banks may not be as common as they once were. However, don't make the mistake of thinking that they're entirely irrelevant. When I was a child, it was customary to put spare change in a piggy bank to save money. This practice isn't unique to me - women throughout Asia have traditionally hidden their savings in unusual places like mattresses, kitchen jars, and even the underground. While I may have moved on from a piggy bank to more sophisticated forms of banking and more women use gold as another form of saving, informal savings mechanisms still play an important role in the financial lives of many women in India and other parts of Asia.
Presently, women
account for slightly more than 50% of Jan Dhan account holders; however, having access to financial services alone does not ensure financial inclusion.
Research suggests that many women do not utilize their Jan Dhan accounts actively. One reason behind this could be the challenges women encounter when attempting to participate in formal economic activities, which forces them to rely on alternative methods of saving money. However, the use of informal savings mechanisms is not limited to physical piggy banks or hiding cash at home. Indeed, there are various forms of informal savings mechanisms that women use, such as rotating savings and credit associations, or "chit funds" in India, where a group of individuals pool their money and take turns receiving the lump sum. These informal savings mechanisms have proven to be a vital means of financial inclusion for women in India.
But why do women in Asia continue to rely on these informal savings mechanisms despite the rise of technology and access to formal financial institutions?
Perhaps, the solution can be found in how women take their economic decision-making.
Keynes's theory of liquidity preference explains that people save money to have access to liquid assets for future needs or emergencies. This is exactly what informal savings mechanisms like piggy banks and chit funds offer to women. But it is Weber's theory of social norms that may explain why women continue to use these informal savings mechanisms. Weber's theory highlights the role of social norms and values in influencing individuals' behaviour, which is particularly relevant to women who are at higher risk of economic and social exclusion. Moreover, the rise of technology and formal financial institutions has not completely eliminated the barriers that women face in accessing financial services. Women may feel uncomfortable with the formal financial system due to cultural and social norms that prevent them from taking economic risks, while informal savings mechanisms are seen as a safer and more familiar option. By keeping a secret, women can retain greater authority over their finances than men who tend to make decisions about allocating resources that do not always correspond with the priorities and interests of women. The numerous accounts of Indian women's concealed savings during demonetisation exemplify how informal saving methods enable them to manage economic crises while maintaining control over their finances. In fact, my own mother also possessed a covert stash that she had amassed without anyone's awareness for many years.
The savings habits of women can be interpreted through economic theories, namely the life cycle hypothesis and the precautionary savings model. The life cycle theory proposes that individuals save and spend based on their projected lifetime earnings. This may explain why women often prioritize saving because they perceive fewer opportunities for increased income over time. Additionally, the precautionary savings model implies that people save money to safeguard themselves against unforeseen events which could impact their financial stability negatively; this is especially relevant for Indian women given their exposure to economic vulnerabilities such as lower incomes and lack of access to social safety nets.
