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
To: MFP
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
On Jun 12, 2015, at 8:14 PM, DeanMMahon@aol.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote: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 MahonIn a message dated 6/12/2015 7:26:25 P.M. Eastern Daylight Time, MicrofinancePractice@yahoogroups.com writes:A well-written article, and quite persuasive.
The microfinance delusion: who really wins?
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Posted by: "Malcolm Harper" <malcolm.harper@btinternet.com>
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