Formalizing Savings

Martin Melecky and Dorothe Singer

No 11322, Policy Research Working Paper Series from The World Bank

Abstract: This paper investigates the determinants of saving behavior—both formal and informal—using individual-level data from the 2021 Global Findex database, covering more than 139,000 adults across 138 countries. The analysis employs a Heckman selection model to distinguish between the decision to save any money and the decision to save formally using a financial account. Key findings reveal that individuals in the poorest 40 percent of households, those with only primary education, and those out of the workforce are significantly less likely to save and even less likely to save formally. While women are equally likely as men to save any money, they are less likely to save formally. Country-level factors also play a critical role. Tax-incentivized savings schemes are associated with an increase in formal saving and an increase in saving overall. Deposit insurance for e-money accounts is positively correlated with both saving any money and saving formally, particularly among low-income individuals. Conversely, a higher share of government-owned bank assets is associated with lower saving rates, and Muslim-majority countries exhibit significantly lower formal saving, likely due to religious constraints on interest-bearing accounts. Policy recommendations include expanding tax-incentivized savings schemes, extending deposit insurance to digital financial services, promoting financial literacy, encouraging wage payments into accounts, reassessing the role of state-owned banks, and, where relevant, supporting Sharia-compliant financial products. Targeted interventions for women and low-income groups are essential to closing persistent gaps in financial inclusion.

Date: 2026-02-24
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