‘Save As You Borrow’ schemes prove successful in turning borrowers into savers

A new report from Fairbanking Foundation finds overwhelming evidence that Save As You Borrow (SAYB) schemes by credit unions can be successful in turning people into habitual savers. Research by the Fairbanking Foundation carried out by Ipsos MORI shows that 67% of SAYB users who had no savings, and found it impossible to put money aside, now have plans to save regularly throughout the year as a result of using a Save As You Borrow product.

This habitual change, brought about by the integration of savings features in financial products, has been hailed by the Archbishop of Canterbury as “having a transformative effect on the financial lives” of SAYB users. The new Save As You Borrow – Credit Unions Creating Good Habits report, was launched at a session of the All-Party Parliamentary Group on credit unions.

Illustrating the scale of the positive impact of SAYB schemes, the report found that only 26% of respondents were saving regularly before taking out an SAYB loan. Through the positive effect of SAYB encouraged saving, 71% of users said they would continue to save regularly throughout the year after paying back the loan. An overwhelming majority of 97% of respondents confirmed that they found the approach from credit unions helpful in encouraging them to save.

When respondents were asked about how they thought their SAYB product was helping them, almost a third replied that they would find it difficult to save if it wasn’t done for them through their loan. One in five also replied that they realised the need to set funds aside for a “rainy day”. Only 15 out of 1,055 respondents said that they thought saving while repaying the loan was unhelpful.

Credit union loans are among the most competitive in the market for amounts up to £3,000. Although customers might think that it takes a little longer and there is an incremental increase in the interest costs of SAYB loans, the additional cost brought about by the savings features will in most cases prove to be very small. On top of this, 79% of people said that this approach was worth it in the long run. 17% of these spontaneously said that it paid off, quite literally, in terms of having a lump sum at the end of the loan and 12% said that it helped change their approach to saving in the future.

In addition to the SAYB impact, the report analysed the effectiveness of further product features that are deemed positive for the financial well-being of their customers and found that many of these prove highly effective as well, such as the support that is given to borrow the right amount: 81% of respondents said that they had reviewed their income and expenditure in order to work out how much they could afford.