Microfinance and Savings Outreach: What are We Measuring?
This paper looks at how MFIs and banks in Bolivia, Nicaragua, and Pakistan, as well as cooperatives among a mix of countries worldwide report their savings data. It gathers data on the account ownership and savings activity and performs a comparison between the dormant and empty accounts. It also studies whether deposit accounts serve as vehicles for savings or transactions. The paper makes the following observations:
- About 50-75% of savings accounts are empty, while balances of non-empty accounts are at least double the average reported size;
- Rather than reaching a broad base of traditional microfinance clients, many MFIs are reaching a substantially smaller number of families in the lower middle class and above;
- Institutions with a mission to serve the poor may not have an incentive to close empty accounts: on the one hand, they can be used to maintain contact with the client and, on the other, they help show better outreach figures;
- Most commercial banks wouldn't normally see the same benefits for keeping empty accounts open as they don't have (or need to measure) the financial inclusion objectives of many MFIs.