Microfinance Gateway>Who Says You Can’t Do MicroSavings in India? Part 1: Community-Based/Owned

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Library » Who Says You Can’t Do MicroSavings in India? Part 1: Community-Based/Owned

Who Says You Can’t Do MicroSavings in India? Part 1: Community-Based/Owned
Jul 2010, Linder, C. & George, D.

Exploring informal savings options

This Focus Note discusses the microsavings options provided by informal and community based/owned methods.

Most MFIs in India provide only credit, as it is easier to undertake, and tend to ignore savings. Almost every Indian MFI has a mission to improve access for all financial services. The note states that microsavings could be provided through self-help groups (SHGs), cooperatives and chit funds. Key steps to fulfil this goal include:

Improving internal management of SHG funds;
Emphasizing savings-linked services through banks to provide savings to SHG members that serve their individual needs;
Bolstering cooperative laws to protect the rights of members and de-politicize the movement;
Helping to build up the capacity of cooperatives;
Ensuring government acknowledgement of the importance of cooperatives in financial inclusion;
Allowing a scaling-up of cooperatives across borders;
Implementing methods to regulate chit funds.

Community-based financial institutions have a much closer mission alignment with serving the underserved than conventional financial institutions. There is, however, a systemic issue of governance, scalability and viability. The note states that there are a few well-managed programs in India that could be strengthened with a concerted, coordinated effort.

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