Serving Small Depositors: Overcoming the Obstacles, Recognizing the Tradeoffs

Publication Date: Jul 2003
Published by: MicroBanking Bulletin
Document Type: Journal Article

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Can the small depositors be served better?

This paper analyzes how some institutions have overcome the regulatory, capacity and cost barriers to serving small depositors. It revisits the criteria that experts have set out for sound savings services, namely:

• Access: Services must be offered nearby enough, quickly enough and at reasonable enough hours;
• Security: Depositors want their savings to be safe;
• Liquidity: In an emergency, people want access to funds immediately; a loan can also suffice;
• Returns: Depositors appreciate a positive real rate of return.

• For most unregulated institutions, mobilizing deposits from the public is not legal.
• Mobilizing and intermediating liquid savings products is much more demanding than offering credit alone.
• Mobilizing small deposits while covering costs is possible.

• ASA, Bangladesh;
• VYCCU, Nepal;
• CVECAs, Mali;
• Kupfuma Inshungu Program, Zimbabwe;
• BRI Units, Indonesia.

• Small depositors require services that are delivered close to the places they frequent.
• In rural areas, proximity can require tradeoffs with the security, liquidity and flexible services offered by formal sector models.
• Financial institutions should focus on developing alternative delivery systems for the benefit of small depositor.