P9 is an attempt to harness Stuart Rutherford's many years of learning about how poor people manage their money in order to help them build substantial savings while at the same time managing liquidity through low-cost loans.
The basic version of P9 started in Hrishipara,
central Bangladesh, in March 2007
P9 is a savings-and-loan service for poor people run by Shohoz Shonchoy, the rural version of SafeSave, in Hrishipara, central Bangladesh, since the spring of 2007.
It is very much in the SafeSave tradition (for more on SafeSave see safesave.org). It offers an individual service with no groups, no meetings and no joint liability, featuring daily doorstep collection and very flexible variable repayment terms. An English translation of the rules can be found here.
However, it differs from other SafeSave products in that it responds even more directly to Rutherford's understanding of the key financial service need of the poor – to manage liquidity in the face of low and irregular incomes. Because poor people have so little cash on hand at any one time, they constantly need to dig into past income (via savings) or future income (via loans) to manage even quite small purchases – a shirt, a visit to the doctors, a school text book, etc.
Most poor people sense that saving is the best way of doing this – saving is less stressful and less expensive than borrowing. But their saving is constrained precisely because of their lack of liquidity, so that the best savings intentions get swept aside by the need to spend. It can also be hard to find convenient and reliable places to save. Very often, therefore, the poor end up borrowing, expensively and with difficulty, to satisfy their liquidity management needs.
P9 responds very directly to this dilemma – by taking deposits, but doing so at the same time as offering liquidity in the form of interest-free loans. It is simply designed: the client takes an interest-free loan two-fifths of which is placed in a savings account. The loans are sequenced to grow in value each time, and very quickly the client finds she has on deposit more cash than she is borrowing, even as her loans grow bigger. She is soon borrowing back her own rapidly-growing savings, lowering risks for both parties. So the P9 experiment tests the question ‘will clients be willing to borrow their own savings in a bid to maximise their savings and at the same time have access to liquidity?’
The answer appears to be ‘yes’. The product is popular, the intensity of transactions has been very high, and account-closures low. Clients borrow, repay and save bigger sums more rapidly than they do in conventional Grameen-style MFIs or even in SafeSave.
Note some other advantages of this product. Its management is extremely simple: the collectors collect only repayments, since there is no interest to collect and savings are made in the office when loans are disbursed. In a Muslim country and in a world that has grown a bit sceptical of microcredit, the fact that the loans are interest free has enormous appeal.
The current expanded version of P9
was introduced during 2013
By 2012 it was clear that P9 was popular and was beginning to erode the demand for Shohoz Shonchoy's other more conventional products (P5 and P7). We decided to close P5 and P7 but to beef up P9 with a 'special savings' product in which clients could store their savings long-term and earn interest. There was some continuing demand from better-off households (those with reliable business or waged or salaried income flows) for interest-bearing loans for business or household investment, so P9 also added a 'special loans' product for them.
By the autumn of 2013 the accounting and management information systems for the three elements of P9 (basic, special savings, and special loans) had been integrated and summaries of these are now downloadable from the databank page. By early 2014 the old P5 product had been entirely phased out and there were only a handful of clients still using the old P7 product.