The Microfinance Experience with Savings Mobilization

This technical note describes the benefits of savings in the area of microfinance. The paper states that MFIs have found that the poor are interested in a number of savings services and products. The challenge for MFIs is to design cost effective savings mobilization strategies that respond to different client needs.

The paper discusses the following:

• Key factors that influence the decision to save:
  • Savings products must respond to the characteristics of different market segments;
  • Demand for deposit facilities by the poor increases as the interest rate increases;
  • Transaction cost influences the depositor's decision.
• By offering savings services, MFIs gain the following:
  • An attractive source of funds from deposits,
  • Lower liquidity risks,
  • A more stable funding source than donor funds or discounted lines from central banks.
• The 4 phases of a product development process:
  • Idea generation,
  • Design and pilot testing,
  • Monitoring and evaluation,
  • Product roll-out and commercialization.
• Savings instruments:
  • Short term such as pass-book savings accounts, sight deposits and current accounts,
  • Longer term savings such as certificates of deposit and savings plan;
• The savings experiences of various organizations in West-Africa.

The note concludes with the argument that savings can help both clients and MFIs reach their financial goals. Savings help:

• Clients during difficult times by covering the cost of large expenses;
• MFIs gain financial independence and profitability.