Rural Deposit Mobilization
This paper discusses the importance of rural deposit mobilization, and explains how an MFI can expand into deposit-taking services in rural areas.
Rural deposit mobilization helps financial institutions provide clients with a sustainable source of funding, and a safe and liquid means to save for life events. It offers security, liquidity and returns to the rural population, and helps financial institutions to move away from donor dependency. When developing deposit products, MFIs should identify the market and develop deposit products and services that balance the trade-off between convenience and return, and respond to market demand. Prerequisites for an MFI embarking on deposit mobilization include:
- Strong governance and professional management;
- Strength and reliability, with strong internal control and financial systems;
- Policy of not using deposits and savings to cover operating expenses;
- History of strong loan portfolio quality management.
Financial institutions that want to get into deposit-taking also need to have staff trained in skills related to deposit-taking, appropriate management information systems and software, and the right marketing for clients.