Savings-Led Microfinance
This paper explores how microfinance can help poor people save.
Saving, among self-help group (SHG) members, promotes active participation, enhances the strength of the group, creates assets, and makes the SHG self-sufficient. To strengthen and mobilize saving, SHGs need:
- Groups, clusters, and federations that are financially strong, well capitalized, profitable, and well managed;
- Good quality loan portfolio;
- Honest and efficient staff and management;
- Secure, simple, and reflective passbook systems and good management information systems;
- Good external regulation and audits;
- Adequate cash to meet members withdrawal demands;
- Secure cash handling systems.
SHGs must have good outreach, with services available when and where clients need them. The paper recommends that SHGs should provide training to members on savings and train staff to popularize savings. They should invite bankers to group meetings to share the importance of savings, and collaborate with them for the financial inclusion of the poor at location level. SHGs should ensure group audit, and categorize members according to poverty situation in order to ensure diversified savings. SHGs should also understand indigenous savings systems.
