The Case for Voluntary, Open Access Savings Facilities and Why Bangladesh's Largest MFIs Were Slow to React

Examines whether there is a demand for voluntary open-access saving services amongst MFI clients and the implications for the capitalization of MFIs if they were to make these services available.

Posits that until recently, compulsory, locked-in savings systems, in one form or the other, were extremely prevalent throughout Asia, and the dominant system in Bangladesh. This system came under strict criticism not only from professionals involved in financing, managing and reviewing MFIs but also from clients themselves.

Concludes that:

• Evidence from the remotest of Bangladeshi villages and indeed from all over the world suggests that the poor want to save, and indeed are saving in a variety of ways. What has been lacking until very recently amongst MFIs were the facilities to allow the poor to save in a way to meet their current needs and opportunities as well as save for the future. Large MFIs have instead concentrated on providing credit facilities at the lowest sustainable interest rates, and on capturing compulsory savings in order to do so;
• There is a clear demand for flexible savings facilities, and it is also apparent that almost all people, including the very poor, want to save, while not all want to borrow all the time;
• There is a clear preference amongst the poor for voluntary, open- access savings;
• Effective, but restrictive regulatory systems and ideally depositor's protection schemes should be in place to underpin the introduction of large-scale savings mobilisation schemes.

[Author's abstract]