Dear Colleagues,
I would like to pick up on what Anuj said about the poor (and the rest of us) needing and using a variety of financial services as Portfolios of the Poor so clearly points out. Over the past weeks I have been interviewing immigrants and learning about their ROSCAS. What has impressed me is how they have creatively dealt with so many issues that have plagued institutional lenders efficiently and effectively. Of course these are based on disciplined savings to avoid needing to go into debt in the first place. Can't pay the minimum quota of $100 per week - two join and pay $50 each. Want to save more - pay $300 per week put you get your payout at the end to reduce risk. Want to get your payout early - negotiate with your group and you can usually get your payout early. Renege on a payment - social suicide - you are blackballed from your group and any other group in your community. Why organize the group? You love to do it, you get the first payout and the others pay you a tip of a few dollars or so as thanks. There is a vast invisible banking system thriving in the immigrant communities of America that is an important reason why immigrants leave poverty behind in a generation or so. They are less likely to fall into the clutches of the PayDay lenders. Through Saving Works we will tap into their wisdom to bring their ideas to the rst.
Over the past decades we who have left institutional microfinance behind and building on what the poor were already doing in their ROSCAS have spread the evolution of ROSCAS into ASCAS with more flexibility as far as savings amounts and easy access to loans and the possibility to earn on savings. With improved record keeping and transparency more are now saving in groups - with most still continuing to save in ROSCAS. The outcomes documented by RCTs and teams of anthropologists - a decline in chronic hunger, building assets, more savings, the availability of a payout when most need them, a major uptick in social capital and the viral replication of these ideas to neighboring villages. This impact is village wide, not just for the users. The cost to introduce these ideas that build on what is already there - about $1 per villager for a modest uptick in the lot of the poor with costs trending downward with the further simplification of the methodology the use of training videos to insure better quality and more focus on viral replication.
Now if we just took the grant portion from a single year of the 31 billion poured into financial inclusion every year - there could be savings groups in place in 2 million villages and thousands of slum communities and these group would collectively mobilize and distribute 10 billion every year of which 3 billion would be the profits from savings that come back to them. Those that needed larger loans could get them from local MFIs as individuals to not put the group's assets at risk while many more would delink from MFIs because they found it better to save and borrow in their own groups. Improving the lot of what may be a couple of billion of the world's poorest for a buck or two a head. Sounds like a winner.
Effectively there are two halves to financial inclusion - institutional that we have been gnashing our collective teeth about and community based where so much more could be accomplished with so little with groups that continue functioning in the face of insurgencies, drought and crumbling institutions. They work l because they capture the brainpower of people who want to improve their lives. Is this the only answer - of course not - should more resources be poured community based solutions, of course. Should we spending a lot of energy linking these groups to financial services - probably not - let individuals do this not groups. Do we need to direct all this - no let's just trust the capacity of smart people to work this out for themselves and then get out of their way.
See "In Their Own Hands: How Savings Groups are Revolutionizing Development" intheirownhands.com
Jeff
Jeffrey Ashe
jaashe@aol.com
-----Original Message-----
From: 'Malcolm Harper' malcolm.harper@btinternet.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com>
To: MFP <MicrofinancePractice@yahoogroups.com>
Sent: Sat, Jun 13, 2015 8:37 am
Subject: Re: [MFP] The microfinance delusion: who really wins?
Indeed, Chuck, you are so right, and it is of course much cheaper to borrow a few million dollars from an 'impact investor' or even a regular bank, than it is to raise the same amount from thousands of small and variable client deposits. We discovered at KBSLAB in India that it cost about 10% to raise genuine demand deposits from our clients, before paying any interest. 'Payday lenders' in UK, USA and elsewhere aren't that keen on deposits either, they may actually be very relieved that they are not licensed to raise them.
Many MFI borrowers in India, probably elsewhere too, I've seen them more recently in Somaliland, save regularly with local deposit takers, who often call every day to collect the small amounts, and then return the total at the end of the month, usually minus one day's savings, a negative interest rate of about 3% a month. These people are not always reliable either, they are usually money lenders as well, so the savers have to bear that risk.
The very fact that poor people use these services shows that they want to save, and can save, and of course they must save, because they don't have regular salaries, or health insurance, or other services which enable 'us' to cope with lumpy payments, expected or otherwise.
What's the solution ? I'd say that regulated licensed and insured commercial banks are; they should be encouraged, compelled if necessary, to reach out to unbanked people, to offer them convenient and accessible savings products, I think it's called 'financial inclusion' these days ! It's happening in India, slowly, mobile phones can help if regulators get their act together and allow it, it's just a shame that Mhd Yunus did not say 'savings are a human right' instead of 'credit (i.e. being in debt) is a human right'.
Malcolm
Sent: Saturday, June 13, 2015 3:29 AM
Subject: Re: [MFP] The microfinance delusion: who really wins?
The writers might be more enlightened if the industry were more enlighted. The industry is still 90% credit, because that's where the profit is.
Most MFIs see microsavings are too expensive to manage.
Microinsurance is generally nothing but an add-on fee for micro-credit.
We talk about other services, but we put our money and effort into expanding our credit product expansion.
It would be useful to see some figures for what we believe to be:
* number of people with micro-credit
* number of people with TRUE VOLUNTARY micro-savings (and it would be nice to see the numbers for ACTIVE savings accounts)
* number of people with voluntary insurance that does more than just guarantee their micro-loan
Does anyone have a source for those numbers? By country? Regionally? Globally?
Chuck Waterfield
Yes, the article at first seems to be is somewhat persuasive.
However, the title cites microfinance, but the author only speaks of micocredit. I would have thought that, by now, writers and practitiioners would be more enlightened.
Dean Mahon
A well-written article, and quite persuasive.
The microfinance delusion: who really wins?
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