Savings and deposits

One of the most important roles of a financial intermediary is to facilitate consumption transformation, which enables the purchase of goods to be rearranged over time. People and firms need to be able to keep surpluses safely until they are required. Many studies have shown how important saving is, even to the poorest people.

From an institutional point of view, being able to mobilise deposits from people enables the whole process of intermediation to take place, as the funds can be lent to people who have a spending opportunity that they cannot satisfy from their immediate resources. There is an important obligation on intermediaries, however, to ensure the safety of deposits and in most countries legislation is in place to control deposit-taking institutions and protect people’s savings.

Library Resources

resource title type year resource
The Impact of Interest Rate Caps on the Financial Sector - Evidence from Commercial Banks in Kenya Report 2018

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Interest rate caps can have far-reaching consequences on the composition and maturity of commercial bank loans and deposits. This paper carefully documents these impacts on the formal financial sector in Kenya after the recent interest rate caps of 2016. Using bank-level panel data from before and after the caps, the paper identifies a significant decline in aggregate lending, an increase in nonperforming loans, and a change in composition of lending away from small and medium enterprises and toward safer corporate clients. Banks also shifted away from offering interest on current account deposits to preserve their interest margins. These quantitative findings are supported by qualitative evidence through detailed interviews of commercial bank executives, and have important implications for economic growth and financial inclusion.​

Pafupi Savings: Expanding Financial Inclusion to Rural Women Case Study 2018

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In 2012, NBS Bank in Malawi found itself at a critical junction as a new management team came on board and faced a range of challenges, from deteriorating loan quality to outdated IT systems to currency devaluation. That same year, the bank piloted agency banking, the first of its kind in Malawi, and received support from MicroLead to develop Pafupi Savings, roll it out nationally, and reach unbanked women in rural areas. While the market potential was undeniable, was this the right time for the bank to bet on the unbanked?

This case study explores the introduction of the tailored savings account designed to expand access for low-income and unbanked people in rural areas, especially women. It aims to answer the following questions: 

  • How are unbanked rural women currently saving?
  • What motivated them to save in different ways, for example, in the informal savings groups that were becoming more common in Malawi?
  • What would they expect from a bank like NBS Bank?
  • What kind of rural women should NBS Bank be thinking about serving?
Author McDonald, J., Rios, A., Saho, R., Nchembe, E., Ntandaza, N & Chigoga, M
Publisher United Nations Capital Development Fund (UNCDF)
Number of Pages 32 pp.
Primary Language English (en)
Region / Country Eastern and Central Africa
Malawi
Keywords Savings, Gender, Financial Inclusion
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Pulling Levers Toward Sustainability. A Framework for Small-Balance Deposit Mobilization Paper 2017

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Yet, financial service providers (FSPs) are often reluctant to engage in mobilizing the savings of low-income populations, which disproportionately excludes women, whose incomes are often smaller and more irregular than men’s. The economics of small-balance accounts presents challenges that make it difficult for providers to make a profit from these accounts. High upfront costs, high transaction frequencies, and distance from traditional banking outlets are among the main deterrents. Despite these challenges, the sheer size of the unbanked population suggests that small-balance deposit mobilization represents an opportunity—albeit one that requires hard work and patience—for FSPs to advance financial inclusion while accessing a relatively untapped market.

THE MOTIVATION to develop this framework is to share the experience of financial services providers (FSPs) that participated in the UNCDF MicroLead Expansion Programme. This paper highlights small-balance deposit mobilization (SBDM) business models used by the MicroLead partner FSPs, many of which are in the process of finding a path to profitability.

THE PURPOSE OF THE FRAMEWORK is to help guide any provider to make a “Go/No Go” decision about engaging in SBDM and, if the provider chooses to proceed, it outlines the set of levers that can make it viable. The framework can be applied to providers considering SBDM for the first time, as well as those considering making significant up-front investments to scale or deepen their current small-balance savings offering. For those FSPs struggling with an existing SBDM initiative, it can also help determine whether to continue or exit this initiative.

Author Elisabeth Burgess; Xavier Martin Palomas; Pamela Eser; et al.
Publisher UNCDF MicroLead
New York, NY, United States
Number of Pages 60 pp.
Primary Language English (en)
Region / Country Global
Keywords Formal Finance, Access To Finance
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Delivering Formal Financial Services to Savings Groups: A Handbook for Financial Service Providers 2017 English (en)

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This handbook serves as a tool for FSPs in the design and delivery of financial services to SGs. The handbook is comprised

of three sections:

  • Section 1: describes the market segment, who the customers are and what services they want.
  • Section 2: provides insights into the three main challenges that financial service providers face in serving this market — last mile delivery, understanding the consumer needs and determining the business value — and how to respond to them.
  • Section 3: details the steps in the design and delivery of financial products to SGs and includes case studies that illustrate the successes and challenges realized in this process.
Delivering Formal Financial Services to Savings Groups: A Handbook for Financial Service Providers  -  English (en)

Sostenibilidad y rentabilidad de las cajas municipales de ahorro y crédito (CMAC) en el Perú Document 2015

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El documento es el resultado de una investigación cuyo principal objetivo era identificar los principales factores cuantitativos y cualitativos que inciden en la rentabilidad de las Cajas Municipales de Ahorro y Crédito (CMAC) mismas que se han convertido en agentes económicos protagonistas del sector microfinanciero. Ello se debe a que en general apoyan al Estado  a enfrentar problemas sociales tales como la generación de empleo, la creación de riqueza, la distribución del poder económico, la promoción de la iniciativa y de la innovación y contribuyen a la inclusión financiera con múltiples programas que tienen presencia tanto urbana como rural. De esta manera, incrementan el nivel de bancarización y desarrollan una cultura de pago que potencia las economías locales y regionales pero sobre todo las del interior del país.

Author Alfredo Mendiola, Carlos Aguirre, José Aguilar, Peter Chauca, Maritza Dávila, Mariela Palhua
Number of Pages 172
Primary Language Spanish (es)
Region / Country Global
Peru
Keywords sostenibilidad; rentabilidad;Cajas de Ahorro y Crédito
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Generación de ingresos y finanzas rurales mediante grupos de la comunidad Colombia Article 2015

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El documento presenta una breve evaluación del proyecto: “Grupos de Ahorro y Crédito de la Comunidad-GACC”orientado a mejorar el manejo de flujos de dinero al interior del hogar, con el propósitode acumular ahorros, aumentar inversiones en negocios, cubrir gastos en educación, mejorar condiciones de la vivienda y/o cubrir gastos de eventos inesperados. Los GACC son grupos de autoayuda conformados por miembros de la comunidad que se reúnen periódicamente para ahorrar. Los participantes tienen la posibilidad de acceder a créditos de bajo costo, utilizando el ahorro del grupo o bien un seguro constituido por un fondo social generado a partir de contribuciones fijas que hacen regularmente los participantes.

Author Fondo Multilateral de Inversión (FOMIN)
Publisher Fondo Multilateral de Inversión (FOMIN)
Number of Pages 4
Primary Language Spanish (es)
Region / Country Global, Americas, South America
Colombia
Keywords Grupos de Ahorro y Crédito
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La morosidad de la cartera de créditos a la microempresa de las Cajas Rurales de Ahorro y Crédito y su relación con la competencia Document 2014 Spanish (es)

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El documento analiza el impacto del incremento de la competencia en el mercado de microcréditos en la calidad de cartera de las cajas rurales. El estudio se realizó en  base a la metodología de “análisis de cosechas”, que consiste en el análisis de la cartera segmentada en segmentos de créditos según la fecha de desembolso. Dicha metodología permite la obtención de indicadores refinados de riesgo pues considera créditos con un mismo inicio de vida y no la cartera total que combina créditos antiguos y nuevos. El trabajo estudió 23 cosechas de microcréditos de las cajas rurales durante el periodo  enero 2011 hasta diciembre 2012. 

Documento  -  Spanish (es)

Author Talledo Sánchez, J.
Publisher Superintendencia de Banca, Seguros y AFP del Perú (SBS)
Number of Pages 68
Primary Language Spanish (es)
Region / Country Americas, South America
Peru
Keywords Desempeño financiero, Evaluación de mercados, Gestión del riesgo
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Savings and Loan Associations - Combining short term benefits with long term structural change - A guide for practioners Guideline 2011

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This guide provides an overview of a promising methodology in civil society development combining microfinance and classic development work, namely the formation of savings and loan associations, and clustering of those into Federations or networks, which can voice the interests and claim the fulfilment of rights of the poor.

The main purpose of this publication is to provide a strategic reference for civil society organizations and their Southern partners and to inspire continued capacity development of Southern partners through the promotion and development of savings and loans associations. This guide argues that there is potential in savings and loan associations to build civil society and that this potential should be realized.

Author Pors, K. K.
Publisher Danish Mission Council Development Department (DMCDD), Danish Forum for Microfinance (DFM)
Number of Pages 60 pp.
Primary Language English (en)
Region / Country Global
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Advancing Savings Services: Resource Guide for Funders Guideline 2010

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The guide provides advice on actions related to client demand, institutional supply, intermediation, and regulation and supervision. It also includes instruction on how funders can assess their own organizational capacity to support savings mobilization and discusses the most effective use of different funding instruments.

Author Jasmina Glisovic, Mayada El-Zoghbi, and Sarah Forster
Publisher CGAP
Number of Pages 56 pp.
Primary Language English (en)
Region / Country Global
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Rural women’s access to financial services: credit, savings and insurance Paper 2009 English (en)

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This paper reviews rural women’s access to financial services, a key factor of successful rural development strategies. Designing appropriate financial products for women to be able to save, borrow and insure is essential to strengthen women’s role as producers and widen the economic opportunities available to them. For this purpose it is essential to understand how context-specific legal rights, social norms, family responsibilities and women’s access to and control over other resources shape their need for capital and their ability to obtain it. The paper argues that it is important that development strategies that aim to boost rural women’s productive capacity must enhance women’s direct access to financial services, i.e. not mediated through their husbands. A second benefit of improving women’s direct access to and control over resources is that this leads to higher investments in human capital and have a stronger impact on children’s health, nutrition and education with important long-term implications for families and societies. The paper details the new products and service delivery models introduced to address some of the constraints faced by women. These include technical innovations that improve access to existing financial services, changes in product design to better tailor products to women’s preferences and constraints, and the development of new products such as microinsurance.

View Resource  -  English (en)

Author Diana Fletschner and Lisa Kenney
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 30 pp.
Primary Language English (en)
Region / Country Global
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When is a Savings Account not a Savings Account? Document 2006

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In this short Note, Ahmad Jazayeri, explores the difference between "transaction accounts" and "accumulation accounts" particularly from the perspective of clients and argues that microfinance institutions supplying one product that mixes savings and loans together are disadvantageous to the client. He mentions the effect of minimum balances that must be held in accounts, blocked savings and spreading costs across clients regardless of how much they transact, as being contributory to this. The point is made that requiring savings to access a loan may have slowed the development of a "saving culture" amongst both staff and clients. He suggests that financial institutions should invest in helping clients to start with "transacting accounts", keeping costs low, and then let them grow into genuine savings or "accumulation accounts".

Author Jazayeri, A.
Primary Language English (en)
Region / Country Global
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Innovations in Rural Deposit Mobilization Paper 2005

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This brief paper suggests that rural deposit mobilisation harnesses the power of small amounts of public savings for the benefit of the community. By combining a large number of small deposits, greater sums can become more available to rural and agricultural enterprises that can use it most productively. The paper suggests that the benefits of rural deposit mobilisation to both rural and agricultural finance institutions (RAFIs) and RAF clients are many – most importantly they can provide a sustainable source of RAFI funding and offer clients a safe and liquid means in which to save.

The paper also notes, however, that several major challenges to mobilising rural deposits exist. The main ones cited:

  • Building rural inhabitants' trust in the financial institutions, sufficient to encourage deposits;
  • Designing demand-driven, rural deposit services that can be delivered in a profitable manner;
  • Identifying investment opportunities in technologies to significantly reduce costs of doing business in rural areas, resulting from low population density and poor physical infrastructure.

This note aims to summarise several recent innovations to mitigate the common constraints to savings mobilisation by drawing on the experiences of USAID programs in Madagascar and the Philippines. It also highlights key lessons learned and their transferability to other country contexts.

The paper begins by discussing in more detail the key challenges in rural savings mobilisation highlighted above. Alongside this it sets out important recent innovations that can be used to help mitigate these issues:

  • Enhancing existing networks and institutional strength
  • "Piggy Banking" in the Philippines
  • Capitalising on remittance technology
  • Open source software
  • Real-time fund transfers
  • Personal digital assistants
  • Cell phone banking

The paper then turns to the key lessons learned and their transferability. These being:

  • Build on existing networks, local strengths
  • Respond to the needs and customs of rural clients
  • Extract the most value from costly technologies
  • Identify appropriate, tailored solutions to rural infrastructure problems
Author USAID
Publisher USAID
Number of Pages 5 pp.
Primary Language English (en)
Region / Country Global
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Mobilizing savings. Key issues and good practices in savings promotion Report 2004

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The present publication provides an overview of the needs and demands of low income households for savings services (micro level), as well as of savings mobilization from the perspective of a financial institution (meso level) and the regulatory financial authorities in developing and transition countries (macro level). It is conceived as a tool for SDC collaborators and partners as well as for all other person involved in the promotion of savings services by financial institutions.

Much has been written on savings in the context of microfinance. We have utilized some of this documentation, as well as case studies from SDC partners around the world. References to key research and case studies are provided at the end of each chapter for those who wish to further examine specific information.

The first chapter, “Why and how do poor households save?”, offers an overview of low income households’ monetary and in kind saving habits, investment decisions and liquidity management. It emphasizes the diversity of households with respect to motives and forms of savings.

Chapter 2, “Mobilizing monetary savings from low income households: The institutional perspective”, summarizes potentials and risks for the institution providing savings services to its clients and members. It is necessary for the institution to fulfill a certain number of prerequisites before entering into savings mobilization in order to ensure the success of that venture and to avoid losses to poor clients.

In chapter 3, “Product development, diversification and innovation”, the reader will become acquainted with microfinance institutions that already offer savings services in different countries, and get an overview of the broad diversity of possible savings accounts. The chapter enhances the need to analyze the potential demand and the existing offer from competitors before designing and implementing the new service. Proceeding in a cautious, professional and informed way will increase the chances of success.

The last chapter, “Legal and economic framework for savings mobilization”, presents important aspects related to macroeconomic conditions and the regulatory framework in which savings mobilization takes place. Some key questions should be asked before designing a regulatory framework that allows microfinance institutions to mobilize voluntary savings from their clients. Are there macroeconomic situations where saving mobilization should not be promoted? Which legal and regulatory framework is adapted to the microfinance sector of the country ? What alternatives are available to protect clients’ savings?

Author I. Dauner Gardiol
Publisher Direction du Développement et de la Coopération suisse
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Global
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Asset Building for Old Age Security Paper 2003

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This paper notes that given the significant burden that providing for the elderly places on the governments of developing countries, private organisations need to offer old age security programs to supplement public efforts. Specifically, it states, that since a large percentage of the workforce in developing countries is either self-employed or part of the informal sector, there is a need for private old age security plans that target low income entrepreneurs.

WWB believes that financial institutions, such as those in microfinance, could gain experience in products for the poor by beginning with a hybrid micropension-microsavings product. In this way, they could help the self-employed poor in accumulating assets, while designing more refined pension products that respond to client preferences and meet regulatory requirements. It is argued that a hybrid product would also enable institutions to hone their financial planning and asset management skills, before offering pure micropension products.

The paper argues that pensions for the poor should directly link contributions and benefits to encourage aggressive savings; and be voluntary, rather than compulsory, to provide the poor with financial flexibility. It notes that there are advantages and disadvantages of to offering fixed versus floating interest rates, flexible versus rigid withdrawal options, and various product terms. This paper aims to set out key measures in the design and implementation of customer-focused old age savings products.

The case for pro-poor asset building is first discussed – looking at capital growth that is required for saving for old age, the significant potential of the micropension market and the shortcomings of the current pension systems. The paper then focuses on micropensions as a new opportunity, where design details of the SEWA Bank pension product are given. The latter section also provides an evaluation of the dimensions of a potential micropension hybrid product.

Author Women’s World Banking
Publisher Women’s World Banking
Number of Pages 12 pp.
Primary Language English (en)
Region / Country Global
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Success in Rural Savings: How One Donor Led the Way Paper 2003

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This Donor Good Practices note provides a case study of German Technical Cooperation (GTZ) in collaboration with the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Thailand.

The short paper highlights that as of December 31, 2002, more than 2.3 million rural Thais held average savings deposits of 83 euros. These savers were attracted by a new financial product called “Save and Get a Chance” (Om Sap Thawi Choke). The program rewards savers who open and maintain savings accounts with prize drawings and parties that celebrate saving. Six years earlier, when the Bank for Agriculture and Agricultural Cooperatives (BAAC) launched the product, there were almost no small savers. “Save and Get a Chance” had such phenomenal success because it was designed specifically for low-income clients. Technical support from Deutsche Gesellschaft für Zusammenarbeit (GTZ) significantly contributed to this success.

For the 24 months it took to develop the product, the German government, through GTZ, paid the salary of one international financial expert and one local expert, and contributed 50,000 euros in technical cooperation. The 191 million euros held by rural Thais in savings at BAAC yielded an impressive return on investment for GTZ and provided BAAC with a sustainable source of refinance. This case demonstrates good donor practice for developing savings services in nearly every respect, showing that savings products for the poor benefit both institution and client.

The paper focuses on the keys for project success - be sure the institution can provide safe and secure savings services, design products that match customer requirements using careful market research, find ways for the donor and local institution to share costs, and allow sufficient time to do it right. Furthermore, it suggests internal preconditions for donor success as well as considering the project benefits for BAAC and its clients.

Author Goodwin-Groen, R
Publisher CGAP Direct Donor Information Centre
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
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A Technical Guide To Savings Mobilization: Lessons from the Credit Union Experience Article 2002

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Growing evidence has shown that while the poor can and, indeed, do save, their ability to do so is hindered by the frequent lack of access to reliable, secure and convenient savings services. At the same time, savings deposits to microfinance institutions (MFIs) can represent a relatively stable source of funds that can be invested in housing and microenterprise loans, and enable them to become more self-reliant and sustainable financial intermediaries.

The World Council of Credit Unions (WOCCU) savings-driven credit union development programmes worldwide have demonstrated that low-income people will substantially increase their voluntary savings deposits if they are provided with a safe and convenient place to do so. This is particularly significant since voluntary savings are by far the most common source of funding for microenterprise startup and expansion, and can help to reduce their vulnerability to future risks.

However, WOCCU maintains that, despite its potential, many existing microfinance institutions are not in the position to begin mobilizing savings responsibly. This Technical Guide is intended to share lessons from the experience of grassroots, savings-driven credit unions to MFIs legally authorized to capture savings, such as postal savings banks, non-governmental organizations (NGOs) that have transformed into legal financial intermediaries and finance companies.

The guide provides details on how to:

  • Determine if an institution is ready to mobilize savings
  • Prepare to capture savings and protect them once captured
  • Provide what savers most value: safety, convenience and returns
  • Develop savings products and conduct marketing campaigns
  • Set market-driven interest rates with real rates of return
  • Manage savings, ensure liquidity and improve efficiency
Author Klaehn, J.; Branch, B.; Evans, A.C.
Publisher World Council of Credit Unions, Inc. (WOCCU)
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global
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Between a Rock and a Hard Place: Savings Patterns of the Poor Presentation 2002

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Too poor to save? They cannot afford not to save! A presentation on the risks facing the poor and the vital importance of savings.

Author Wright, G.A.N.
Primary Language English (en)
Region / Country Global
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Striking the Balance in Microfinance: a practical guide to mobilizing savings Book 2002 English (en)

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This book grew out of the Savings Best Practices project, which aimed to capture and share the best practices learned from credit union savings mobilisation programmes in Latin America. The vast majority of microfinance institutions continue to be lending institutions and it is thought to be important to introduce a more balanced approach now that emphasises the centrality of savings in self-sustainable institution development.

This book shows in a step-by-step fashion how to mobilise savings to create more stable and robust MFIs and financial markets. However, it also made clear that not all MFIs should engage in savings operations. Any MFI that cannot assure the safety of deposits made with them has no business raising savings from the public. Topics covered in the book include:

  • Institutional preconditions: testing readiness and achieving sustainability
  • Savings product management
  • Product development and marketing: meeting the local demand
  • Costing savings mobilisation and ideas for lowering costs

Three chapters are devoted to experience in Nicaragua and Ecuador. These are followed by a toolkit which includes:

  1. Management evaluation
  2. Calculating interest on savings
  3. Evaluation of internal control in the deposit cycle
  4. Introduction to liquidity and asset-liability management
  5. Monitoring and projecting cash flow
  6. Calculating the net margin
  7. Risk analysis in savings mobilisation
  8. Profit and loss simulation model
  9. Creating a marketing campaign
  10. Guide to designing surveys
  11. Model surveys
  12. Calculating the costs of savings mobilisation
woccu.org  -  English (en)

Author Branch, B.; Klaehn, J.; (eds)
Publisher Pact Publications; WOCCU
Washington DC, USA
Number of Pages 392 pp.
Primary Language English (en)
Region / Country Global
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Filling the Deposit Gap in Microfinance Paper 2002

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Dale Adams notes that AID’s experience with small farmer credit programs, the World Bank’s funding of development banks, and the Inter-American Bank’s efforts to channel funds into financial cooperatives through a regional organization all discouraged deposit mobilization efforts. He wonders if all of the donor and government money given to the microlending industry hasn’t had the same result. He makes a number of recommendations to donors and governments about how they can avoid this and promote more innovation and outreach in deposit taking.

Author Adams, D.W.
Primary Language English (en)
Region / Country Global
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A Penny Saved... Document 2002

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When we talk about designing institutions that facilitate savings, facilitating the act of saving is what we should focus on. Saving is critical for the poor - unfortunately for the poor, saving in cash, the most versatile asset, can be inconvenient and risky. Drawing on SafeSave's experience in Bangladesh, this presentation goes on to explore ideas for easy, flexible ways to save and borrow.

Author Staehle, M.
Primary Language English (en)
Region / Country Global
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