Case Study

Serving Small Rural Depositors: Proximity, Innovations and Trade-offs

What ingredients make a sustainable microfinance organization?
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The author lists out salient features of four organizations viz. ASA in Bangladesh, VYCCU in Nepal, CVECA in Mali and CARE's KIP in Zimbabwe, to prepare a menu of delivery options and staffing strategies to make these systems sustainable.

The author identifies the following delivery systems:

  • Simple, part time, one room office instead of a full fledged branch;
  • Commission agents or salaried staff collecting deposits at the customers' places;
  • Integrating services such as the savings collection and loan recovery;
  • Promoting self-managed groups without directly engaging in financial intermediation, such as the self help group (SHG) model.

The author further suggests some key staffing ingredients:

  • Deploying single staff to both handle and record cash transactions;
  • Separating functions in accordance with educational requirements, for example local field staff with minimal education to collect loan and savings payments and issue receipts, while a better-educated field staff may update passbooks;
  • Decentralizing operations to minimize the cost of managers' travel time;
  • Spreading costs by outsourcing, networking or drawing on a central facility, jobs such as training, internal auditing and developing marketing materials;
  • Using volunteers and employing clients as staff and limiting the hours of work;
  • Standardizing and simplifying the systems for better understanding and management by less educated staff.

Finally the author puts forth a word of caution for the trade-off in the process:

  • Security: Keeping same staff for collection of deposits and maintaining records opens doors for fraud and mismanagement;
  • Liquidity: MFIs mostly offer illiquid services like compulsory savings as the less educated staff is not able to manage liquidity;
  • Convenience: The services are limited to group meetings or weekly/monthly collections, thus compromising convenience of the clients.

About this Publication

By Hirschland, M.
Published