Introducing Savings in Microcredit Institutions: When and How? (Focus Note No. 08)
Robinson, M.S.
Publication Date: Apr 1997
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper
When and how a MFI should mobilise voluntary savings from the public?
When? - Considerations are:- an enabling macroeconomy, an appropriate legal and regulatory environment, a reasonable level of political stability, and suitable demographic conditions
- government supervision of MFIs in order to protect depositors
- MFIs should have good record of funds management, rates of loan recovery etc.
How? - Consider: - adding voluntary savings to a microcredit program will fundamentally change the programme
- compulsory savings and voluntary savings are incompatible
- products should be designed and priced together
- deposit instruments should be appropriate for local demand
- there is a substantial need to develop human resources
- new marketing strategies will have to be developed
- careful attention must be paid to sequencing
Concludes that instituting a voluntary savings program is a prime illustration of 'haste makes waste.' Getting the 'when' and the 'how' of introducing voluntary savings mobilisation right enables MFIs to meet local demand for savings services and to provide a larger volume of microcredit, thereby increasing both outreach and profitability. [author]
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