Introducing Savings in Microcredit Institutions: When and How?

When and how a MFI should mobilise voluntary savings from the public?

This paper discusses issues an MFI must consider when mobilizing voluntary savings.

Prerequisites for mobilizing savings include an enabling macroeconomy, appropriate legal and regulatory environment, reasonable level of political stability, and suitable demographic conditions. There is a need for government supervision of MFIs in order to protect depositors. MFIs seeking deposits from the public should have good record of funds management, rates of loan recovery etc. The paper states that:

  • Adding voluntary savings to a microcredit program will fundamentally change the program;
  • Compulsory savings and voluntary savings are incompatible;
  • Products should be designed and priced together;
  • Deposit instruments should be appropriate for local demand;
  • MFIs must develop appropriate human resources;
  • MFIs must develop new marketing strategies;
  • Sequencing must be given careful attention.

Finally the paper states that MFIs must not be hasty when instituting a voluntary savings program. Getting the timing and process of introducing voluntary savings mobilization right enables MFIs to meet local demand for savings services and provide a larger volume of microcredit, thereby increasing outreach and profitability.

About this Publication

By Mukherjee, J.