Who Says You Can't Do Microsavings in India? Part 1: Community-Based/Owned

Exploring informal savings options

MicroSave's India Focus Note No. 45 discusses the microsavings options provided by informal and community-based/owned methods.

Most MFIs in India provide only credit, as it is easier to undertake, and tend to ignore savings. Almost every Indian MFI has a mission to improve access for all financial services. The note states that microsavings could be provided through self-help groups (SHGs), cooperatives, and chit funds. Key steps to fulfill this goal include:

  • Improving internal management of SHG funds;
  • Emphasizing savings-linked services through banks to provide savings to SHG members that serve their individual needs;
  • Bolstering cooperative laws to protect the rights of members and de-politicize the movement;
  • Helping to build up the capacity of cooperatives;
  • Ensuring government acknowledgement of the importance of cooperatives in financial inclusion;
  • Allowing a scaling-up of cooperatives across borders;
  • Implementing methods to regulate chit funds.

Community-based financial institutions have a much closer mission alignment with serving the underserved than conventional financial institutions. However, there is a systemic issue of governance, scalability, and viability. The note states that there are a few well-managed programs in India that could be strengthened with a concerted, coordinated effort.

About this Publication

By Linder, C. , George, D.