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Is There a Business Case for Small Savers?
Sep 2010, Westley, G., Palomas, X.
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Do small savers contribute to or undermine the sustainability of the MFI?

This study examines quantitatively whether or not small savers—defined here as the half of all savings clients of a microfinance institution (MFI) with the smallest deposit account balances—contribute to or undermine the sustainability of the MFI. MFI sustainability has long been accorded a place of central importance in microfinance for reasons that are well known. Perhaps because of the necessary focus of microfinance for so many years on lending, achieving sustainability has often been thought of in terms of reducing loan granting and recovery costs and charging sufficiently high loan rates. Arguably, less attention has been paid to the impact of other products, such as savings accounts and particularly small savings accounts, on MFI sustainability.

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03 Nov 2011
Balance sheet account versus savings account

This is an insightful study. However, costs of servicing small saver clients either in present or in future as presented in the study appear to be not as encouraging as a business model for deposit taking MFIs. On the other hand scope seems likely to be in small business accounts. Small business account may be defined in this context as integrated transaction account that serves a client for all transactions under one account of the client, the outcome of which is a balance sheet of a client and not a savings pass book. This means a small saver client maintains a minimum threshold balance in his balance sheet as opening balance and all the financial transactions of the small saver client are managed and maintained in the balance sheet. Thus the client has a transactions account rather than a savings account. The profitability is worked around the balance sheets of all the clients and not as profits by type of transaction such as savings, credit, remittances, insurance so on and so forth. The sum of maintaining and managing all balance sheets is the operations cost as against costing by each type of transaction. This requires small saver client to appreciate that he parks his home and economic activity finance with the Financial Institution which plans some of clients financial planning items such as savings, insurance, credit repayments, business payments etc on an ongoing basis.

India

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Publisher(s):
CGAP