Worldchanging: Bright Green: Small Deposits Add Up: Savings, not just loans, factor into microfinance formula

Description

Small Deposits Add Up: Savings, not just loans, factor into microfinance formula

Yak herders in Mongolia may seem like the most unlikely of bank customers. There’s little infrastructure in their largely rural country, making it tough to find a local branch office. But in these sparsely populated steppes, opening a personal savings account is increasingly seen as a first step out of extreme poverty, according to international microfinance leaders.

Until relatively recently, Mongolia’s poor were among the world’s “unbanked,” overlooked and underserved by formal financial institutions. Without access to credit, those on the margins of the economy struggle to stay a step ahead of the loan sharks and moneylenders. Financial illiteracy often persists for generations.

Microfinance is slowly changing this picture. By offering small, no-collateral loans to rural villagers and the urban poor, microfinance institutions (MFI) enable borrowers with scant resources but smart business ideas to improve their lot in life.

When a dozen microfinance leaders gathered in Portland, Ore., recently, at a global forum sponsored by Mercy Corps , I expected the conversation to focus on loans. So I was surprised to hear the emphasis on savings.

“Can poor people save their way out of poverty? It’s a fundamental question in development,” acknowledges Steve Mitchell, vice president of financial services for Mercy Corps. The global aid organization considers microfinance a key strategy to combat poverty and has spent a decade building its network of MFI partners around the world. Increasingly, these institutions are expanding their offerings to include savings products. Many cite the example of Grameen Bank , the microlending pioneer, which has seen its customers in Bangladesh emerge from extreme poverty through a combination of savings and loans.

Mongolia is one place determined to demonstrate the power of small savings, as well as small loans, to improve ...

Original URL

http://www.worldchanging.com/archives/010709.html

http://www.worldchanging.com/archives/010709.html