Overview of Practical Challenges in Local Saving Mobilization by Ethiopian Microfinance Institutions

This case study presents some of the experiences and obstacles to successful voluntary savings mobilization in the Ethiopian Microfinance industry by analyzing the Women Entrepreneurship Development Program (WEDP). The WEDP is one of the pillar projects of the Private Enterprise Programme Ethiopia (PEPE), funded by the UK’s Department for International Development (DfID). The study suggests that if MFIs want to provide voluntary savings on a sustainable basis, they need to address gaps in governance, institutional culture, product design, incentives, outreach as well as frontline capacity, and confidence in voluntary savings promotion. Key findings include:

• Products need to be customized to the needs of different target groups;
• Institutions should demonstrate their competitive advantage in relation to other informal and formal savings mechanisms;
• Training and capacity building programs should also apply to partners and stakeholders of MFIs who are involved in promotion on behalf of the MFI;
• Use of end point devices and point of sale or personal digital assistant devices for delivering services in the field can enhance outreach to capture more liquidity;
• Senior managers must create an institutional culture of voluntary saving by helping employees understand why savings mobilization is as important as credit.