Gambling to Save
The Haitian lottery stalls are indeed fascinating (see Amin post). They are still going strong despite the earthquake, cropping up like weeds throughout the tent cities.
Their popularity is understandable.
Borlettes are a pretty good place to save, when you look at the alternatives. In Haiti, the poorest people were fleeced by credit unions in 2004. Depositors had sold their assets – cows, goats, and bicycles – to put their money into the Caisses Populaires, which were promising ridiculously high and unsupportable returns. Huge numbers of Caisses collapsed from fraud, leaving depositors with nothing. No wonder playing the borlette seems like a good option. A 20% negative return is better than a 100% negative return.
Turning Thrill-Seekers into Thrift-Seekers
Understanding gambling impulses is key to designing safer financial services. Many financial institutions (BRI for example) look at the prize aspect of the lottery and incorporate elements of chance into their savings products. But, product design is only a piece of the puzzle. Savvy businesses and banks might make dull products sizzle if they paid heed to what their shadier cousins down the street were doing. For example, in Haiti, an entire value chain has sprung up around the borlette culture, which involves paying for the divination of lucky numbers. It’s big business and shows how engaged users are in choosing their bets.
But, I digress. Here are some ground rules for banks and MFIs whose savings services are just a bit too bland:
Rule 1 – Take your cues from culture. If people are using dreams to help them win the lottery, then market savings product that ask users to chase their dreams. If they are consulting astrology experts to win, then offer them astrological consulting your savings product. If lottery stalls are painted in bright colors, then paint your branches in bright colors.
Rule 2 – Make your product crystal clear. If users like the transparency of the lottery (and they do because they know ahead of time exactly how the numbers are drawn and what they payout will be), then make your incredibly complicated savings product incredibly simple. Forget compound interest. Offer them something better – airtime minutes, lottery tickets, whatever is easy to calculate.
Rule 3 – Be ubiquitous. If people like the ubiquity of the lottery (they can get rid of any loose change frequently) then find a way to make your product ubiquitous. Sell savings through savings resellers. We know people will pay to save, and M-PESA is proving this.
And It’s Not Just Haiti
It turns out that Haiti is not the only country where local gambling stalls are chock-a-block. For example, in Ghana, more newspapers are dedicated to the lottery than to any other topic, catering to masses of players. The Dominican Republic has an estimated 35,000 stalls equivalent to that of Haiti. The Fahfee in South Africa is ever popular and in India private lotteries are spreading like wildfire. Even Bhutan – yes Bhutan – has lottery kiosks in shopping malls. So get out there and see why people would rather put their coins into games of chance and not into safer savings. Then make and market a more exciting product. Convert a few punters headed for the gambling stall into a few depositors headed for the savings stall.