Review of Savings Options for MFIs in India

This paper outlines different savings options available for MFIs in India. It presents a comparative analysis of products and suggests assessment parameters and steps for MFIs to select, design and introduce appropriate products.

The study focuses on six major savings options, namely, business correspondent (BC) model, gold loans, money market mutual funds (MMMFs), micropension schemes, unit linked insurance plans and term insurance plans with maturity benefits. It uses the 8 Ps framework as well as a list of selected attributes for a comparative analysis, and presents a summary of findings.

MFIs must assess the tenure of the need and the liquidity requirements, and match it with the appropriate product option. Conclusions include:

• MFIs need to base introduction of savings services on market research and feasibility analyses;
• Bank savings accounts delivered through BC channels and MMMFs are appropriate for consumption smoothening and short-term needs;
• Longer term needs require more illiquid options like gold loans and life insurance plans;
• Pensions are most appropriate to ensure a regular stream of income for old-age security.