Voluntary Saving Mobilization as a Service for the Poor and a Source of Funds for Regulated MFIs

Publication Date: Mar 2001
Published by: World Bank
Document Type: Presentation

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Principles, benefits and drawbacks of large scale savings mobilization by MFIs

This document presents an overview of the basic principles of Large-Scale Saving Mobilization (L-SSM) by regulated microfinance institutions (MFIs), their advantages and disadvantages. Some of the important principles are:

• MFIs should offer only a few carefully-designed and tested products;
• L-SSM should be limited to publicly regulated and supervised banks and non bank financial institutions.
• Savings should be mobilized from general public and be properly sequenced.
• A combination of saving product must be available.

• Assess that the MFI is profitable, has good governance and a record of high repayment;
• Study international experiences and conduct demand research;
• Introduce pilot projects, monitor, assess and review them;
• Follow a systematic approach.

• The savers may need funds when the MFIs are not open;
• The savers have to pay a transaction cost;
• Savers with very small account balance have no interest benefit.

• Poor people do not require high interest rates with trustworthy institutions;
• When savings are collected from the public, the problem of small accounts of poor is solved;
• The high liquidity demands of poor do not create any problem since all the withdrawal does not come at the same time.

• Poor people saving in such institutions get security, convenience, liquidity;
• Good service, returns and potential access to loans are other advantages;
• Individuals, enterprises, groups, organizations etc. benefit from it.