In this week’s Time: The forgotten half of microfinance

A quick note on an interesting article in this week’s Time: Barbara Kiviat writes about the emergence in the field of microfinance for the need for a safe place to save and deposit money, which is something that we at the Global Assets Project have been talking about for a while.

While microcredit was at the root of the microfinance movement’s beginnings, what’s becoming clear is that those who take out small loans also desire a place to deposit and save their money. Indonesia’s Bank Rakyat, she notes, has ten savers for every one borrower, and their borrowers use the loans for household needs about 30% of the time. And they save in the form of assets (such as livestock and jewelry), requiring them to pay a fee to pawn those assets in times of need.

Some solutions? Agent-based banking, where financial services are delivered through pharmacies, newsstands, or other institutions. Mobile banking has likewise taken off in places like Kenya, with 7 million customers registered under M-PESA’s mobile-based service for storing and sending money.

While Kiviat notes that some microfinance institutions are hesitant to take deposits- -seeing it as time-consuming, expensive, and not profitable– other organizations are finding creative and grassroots ways to bring savings to the center.

Oxfam’s Savings for Change program, for example, is working at the village level in Mali, Cambodia, Senegal, and El Salvador to create small savings groups. Based on the tanda model in India and tontines in West Africa, members pool savings on a weekly basis and lend out portions of the savings to members in need of loans.