Why Microfinance Institutions in Bolivia have Virtually Ignored Savings

Document sees the reasons for poor savings mobilisation as:

• The abundance of "easy money" from donors (as well as the Bolivian government and second-tier institutions) has created a powerful disincentive to mobilise savings, since this funding source is more expensive and risky than concessionary loans or grants;
• Neither the MFIs nor the MFI associations have cultivated an image for themselves as solvent, reliable deposit-taking institutions;
• The regulatory environment in Bolivia impedes deposit-taking among the poor and in rural areas.

Identifies MFIs' need for an institutional commitment to capture savings, diversify away from soft money, concessionary loans and toward deposits in the capital base of the MFI. Emphasises that without institutional commitment, attempts at savings mobilisation will fail and makes specific recommendations

MFIs must further invest in human and financial resources in:

• Market intelligence - market research and targeted marketing;
• Cost accounting systems that are sophisticated enough to disaggregate costs at the branch level and by product;
• Risk and liquidity management - monitoring of cash asset ratios as well as a range of other risks;
• Training and Incentives.

​Government bodies should:

• Loosen the reserve and reporting requirements in rural areas for branches that maintain total deposits below a pre-determined threshold;
• SBEF needs to support strategic alliances between regulated and non-regulated entities;
• Consider eliminating the tax on interest earned;
• Reduce ID requirement to open an account;
• Allow savings accounts for under 18s.

Donors should:

• Direct any subsidy towards human resource development, financial management, market intelligence, MIS systems development and well priced funds for loan portfolios;
• Support recommendations made for government and MFIs and be more coordinated.