Savings and Asset Building at CGI Part I: Poverty Alleviation Working Group Commitment Lunch

When I walked around yesterday’s CGI exchange, getting a convention-style glimpse into the organizations and corporations making commitments to poverty alleviation this year, I was particularly excited to see not only institutions focused on financial services for the poor, but particular, savings and asset-building. Yes, the actual word – asset-building – at the CGI. Considered by some as an inaccessible term to describe wealth creation opportunities for the poor, I am thrilled to see it permeate the global microfinance field (as I assumed it would). Oweesta, the CDFI running IDA and other asset intervention work in native American communities in the USA, seems the only organization focused on empowerment of native communities, and if carrying the AB message in all of their materials. And Oxfam, who have been running a Gates-funded Savings for Change program (informal rotating savings groups mobilizing deposits for those still completely untouched by formal microfinance) for a few years around the world, have added the term asset building to the September version of the program’s one pager.

Asset-building is catching on, and in the microfinance field, savings is the catalyst. For example, in the first working group session on poverty alleviation (just wrapped up at 1), three of the biggest names in microfinance (Christopher Crane of Opportunity International, Elizabeth Littlefield of CGAP and Maria Otero of Accion International) discussed their experience with their organizations commitments to the poor. For two of of these microfinance leaders, savings took center stage.

For Christopher Crane, CEO of Opportunity International made a commitment in 2005 to scale to 50 million people into financial services and 5oo million dollars in the field within 5 years Just three years, later, OI has already mobilized 600 million dollars, and amazingly half of that (300 million dollars) comes from the savings of clients in Africa. Obviously, this is an indication of a tremendous demand for savings. And itÕs also a sign of things to come. Crane foresees the MicroFinance field consolidating; bigger, stable, formal institutions will be best able to use new technology to digitize transaction (smart cards, mobile banking, etc), and they also will have greater access to capital not only through their ability access the capital markets, but also through their ability to mobilize savings)

Elizabeth Littlefield of CGAP spoke of their 2005 commitment to figure out how to get mobile banking to poor people in developing countries. Technology reduces the transaction costs that are largely the main obstacle to banking services for the poor, though it often needs to be used in conjunction with a cash point (i.e., banking agent). The lessons CGAP has learned from its 10 pilots are both good and bad. The good news is that it works and its popular (20 telecom operators experimenting with mobile banking and demand is huge (3 million subscribers in 18 months in Kenya)). In her view, though the bad new is that mobile banking has not figured out savings. In the next two years, CGAP is committing to understanding the needs of the poor in order to tweak the system, create better policy environment, do more experiments, and in the end, create good products that will reach 25 million people with effective mobile banking services.

All this on savings and asset building, and we haven’t even started the working group session on financial services for the poor… Stay tuned…