Paper
Significance of Small Deposits for Microfinance Providers
The significance of small deposits as funding sources for microfinance providers in Pakistan
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This paper examines the significance of small deposits as funding sources for microfinance providers (MFPs) in Pakistan. It informs the debate on small versus large deposits in microfinance, using data from five MFPs from different countries.
Data collected for the paper shows that MFPs are focused on reaching small depositors. Over 90% of savings accounts in all sample institutions fell under the small category. Small depositors, however, make up only a tiny fraction of microfinance banks’ (MFB’s) deposits. Findings include:
- MFBs need to access the large depositor or other alternate sources of funds for financial intermediation;
- MFPs therefore need to compete with mainstream financial institutions for the public’s money;
- MFPs thus have to strategize their deposit mobilization keeping in mind that they will need the large depositor for sustainability;
- Potential of small deposits to become a major funding source for MFP may be limited;
- MFPs who want to have a strong and significant deposit base will need to gain mainstream recognition;
- They will also have to build a service mix that serves both low and high end clients.
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