A woman who works for me, Irshad, comes 4 times a week, for about an hour each day. She works in at least one other house that I know of, and on average, I would say she earns around Rs. 6000 a month. Her husband drives a taxi, not his own, and earns a similar salary, so they have a combined salary of Rs. 12,000 a month. Rent for a small flat takes a large chunk out of the month’s wages, so they want, desperately, to buy their own home. She came to me asking if I knew of any committees they could become a part of (’committees’ or ‘BCs’ are pools of funds shared by a group of people. Everyone puts in a monthly amount and the pooled funds are given to members of the group every month - essentially, a way to acquire a large amount as a lump sum instead of saving over a period of time), but since this would also mean tying herself down to monthly payments over a long period of time, I suggested opening a bank account instead.
Last year, I posted a tirade on one-sided banking practices, especially in the Islamic Banking sector in Pakistan. Since then, State Bank issued a directive to raise PLS interest rates substantially across the board, from 2% to 5% - a pleasant surprise considering the minimum interest rates on loans do not fall below 12%. I thought an account earning 5% interest would be smarter for Irshad than a committee, so I asked her to come by with relevant documents and whatever amount they had saved so far, and I would help her open an account.
Over a period of 18 months, the couple had managed to save Rs. 5,000 - a minor feat on their limited earnings.
It’s a pity, then, that the amount wasn’t enough for Habib Bank to open a Savings Account. Incredible, in fact, that the only account available to Irshad was the basic account. This account has no minimum balance requirement, though you need Rs. 5,000 to open one. You are entitled to 2 free withdrawals a month via cheque, but each leaf of the cheque book will cost you Rs. 5 per leaf, or Rs. 50 per booklet. If you withdraw more than 2 times in one month, you will be charged Rs. 50 for each additional cheque. You can subscribe for an ATM card which has no transaction charges attached, but will be charged annual fees for the ATM card. Either way, once you put the money in, you earn nothing, and only lose money. For Irshad, Rs. 50 could mean feeding her entire family for one day.
When I asked the customer service rep for other options that will allow Irshad to earn any amount of interest on her savings, I was told that the only option was a stripped down version of a savings account, for which she would need to maintain a minimum balance of Rs. 20,000. She would, on this account, earn her 5% interest. From the way he spoke about the economy, one would think offering 5% interest on Rs. 5,000 would break the bank.
I’ve asked around, looked at other banks, and I have found no bank that offers any incentive for this economic strata to either open an account, or to save their money. Obviously, the ‘common man’ is better off living day to day than saving for his twilight years, or his children’s futures.
I remember opening a Super Savers account in Barclays in 1984 - the account was specifically for children, and could be opened with £10. Better than that, however, is this list of basic offers from some of the top banks in the UK, where you can open an account for as little as £1, and earn up to 6.50%, annually, and in some cases monthly. Banks across the world will encourage their customers in every way possible to save their money, and will add frills to their savings accounts in an effort to bring savers in.
At our banks, they show us the door.