Overcoming Regulatory and Legal Constraints to Savings Mobilization

The regulatory & legal constraints microfinance providers face offering savings services to the poor
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This paper was commissioned by the Microcredit Summit Campaign in 2006. It:

  • Provides a brief overview of savings mobilization within the context of the microfinance industry and of the ways in which poor populations save around the world.
  • Highlights the principles of financial regulation as they relate to deposit-taking, including:
    • Protecting the safety and soundness of the financial system;
    • Protecting the depositor who has limited information and time.
  • Outlines the regulatory restrictions various microfinance providers face in offering deposit-services as follows:
    • For banks - minimum deposit requirements, identification requirements and branching requirements;
    • For NBFIs restrictions in the type of deposits or lack of permission to accept deposits;
    • For nonprofit organizations permission to only accept compulsory savings.

The paper concludes with a discussion on how institutions are attempting to overcome three types of constraints:

  • Regulatory constraints:
    • By lobbying for regulatory changes such that their institution can offer deposits to the poor;
    • Through institutional transformation into an organization that can offer deposits;
    • Through partnerships with deposit-taking institutions.
  • Capacity constraints: Through change in management and training.
  • Cost constraints:
    • By limiting the location and time when deposits are made;
    • Using cheaper technologies;
    • Accommodating deposits within the existing infrastructure;
    • Using innovations in information and communication technology.