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Are Deposits a Stable Source of Funding for Microfinance Institutions?
Jun 2009, Abakaeva, J. & Glisovic-Mezieres, J.
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Examining the nature of deposits from poor individuals

This CGAP Brief examines the actual behavior of deposits raised from poor individuals by looking at recurring seasonal savings patterns, volatility of aggregate balances of demand and term deposits, and the effect of external events on deposits.

The study examines five financial institutions that represent large markets of under-served poor people and maintain large deposit volumes. These organizations include Allied Bank (Pakistan), VTB (Georgia), BPR Kebomas (Indonesia), Equity Bank (Kenya), and Banco Sol (Bolivia). The paper looks at each institution’s deposit base in terms of long-term trend, seasonal patterns, annualized daily volatility and average life of demand deposits. Findings include:

Small balance demand deposits provide relatively stable aggregate balances;
Deposit balances are not seasonal;
Deposits are not very sensitive to external macro events.

The study shows that some portion of small balance deposits in any institution can be considered a stable source of funds. Banks and MFIs should invest in analyzing their particular depositor base to determine what proportion of it can safely be used for long-term loans.

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25 Jun 2009



younes altamimi freelance consultant MF Jordan

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Journal Volume/Pages:
4

Publisher(s):
CGAP