Banking on the Poor: Saving and Lending Groups for the Poor

This paper discusses the program Banking on the Poor (BOP), which is designed to meet the needs of poor illiterate village women who often need a safe place to save more than a loan. The main feature of BOP is that members lend their savings at interest to other members, who use it for various purposes. BOP is based on the following principles:

• Use of the best experiences worldwide;
• Important demonstrable impact;
• Large scale;
• Low cost;
• Efficient training and quick graduation;
• Replication by local institutions;
• Self-propelled group formation by trained group leaders;
• A commitment to learning and sharing knowledge.

The paper lists the advantages of this model as follows:

• Its target is to reach the poorest people in the area;
• There are no restrictions on how loans are used;
• Members can leave the group without incurring a penalty;
• The savings contributed are allowed to be variable, in terms of seasons;
• The groups mitigate risks by evaluating loan proposals, providing advice and support to each other, and obtaining business literacy training.

The paper concludes by stating that the BOP model:

• Has substantial social and economic benefits and can be replicated by NGOs that lack the financial sophistication to be MFIs;
• Will enable NGOs that already have a presence in the community to provide quality savings and lending services;
• Builds on the existing traditions of saving and lending, and partners with NGOs to reach those that traditional financial institutions cannot.