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Yes! I want to support microfinance and empower people to work their way out of poverty.
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| Savings ProductsBenefits & Challenges to MFIs | Our Services | Further Resources |Contact Us
For most of its history, the microfinance industry has focused on delivering microloans to microentrepreneurs, and it is still in the process of seeking greater scale at greater speed for delivering microcredit. The experience of microfinance institutions (MFIs) across the globe that mobilize savings, however, demonstrates that the demand for deposit products is many times that of credit. Although low-income customers save in several forms, not necessarily through formal means, there is a pervasive need for safe, reliable savings mechanisms.
Accordingly, savings mobilization is becoming a critical strategic goal for MFIs, especially as microfinance markets become more competitive. MFIs are looking to build their capacity to mobilize savings, either as a funding strategy to support growth while reducing financial costs of funds, or, as a marketing strategy to promote customer loyalty and retention.
Benefits & Challenges to Microfinance Institutions (MFIs)
Among the key attractions of mobilizing savings is reducing the cost of capital for the MFI, as the financial cost of savings is lower than most other funding options. Another key benefit is to diversify and expand the customer base and better balance the liability structure. Savings mobilization is also the key strategy to promote customer loyalty, retention and to foster greater cross-sell of an MFI's financial services.
One of the challenges that MFIs will face when mobilizing deposits is controlling expenses, as operating costs of managing and delivering savings services are relatively high. Microsavings customers are also more sensitive to charges and fees than wealthier clients, given the smaller average balances and income levels. Another key challenge is for the MFI to diversify its target segment, as mobilizing savings usually requires attracting a different clientele than the typical microentrepreneur. Savings mobilization also requires certain standards for quality in customer service, which depends on key resources and capabilities, such as technology, processes and qualified staff. For institutions transforming into financial intermediaries, the challenges are great as other issues – such as changing a corporate culture, implementing practices required by regulation, developing key functions like treasury and risk management, and building a brand image – require commitment and significant investment.
ACCION’s Services
ACCION has introduced savings products to credit-oriented MFIs, particularly in the following areas: - Product development and management: The development of savings products presents the challenge of meeting with equal effectiveness several corporate objectives such as liability strategies as well as customer acquisition and retention. Key to a savings product strategy is the need to do more in-depth segmentation of the market and to develop products tailored to the very different needs required for a successful portfolio mix.
- Image and brand development: Customers select the institution in which they want to entrust their funds. This requires that deposit-mobilizing institutions have a solid brand-development strategy. ACCION applies a brand development model that helps institutions have greater control of the perception of their brand in the market.
- Branch operations: Delivering flawless services is critical as customers of all segments tend to be intolerant of poor service related to their savings, as they have alternatives. Support in strengthening branch operations includes both front office activities such as sales and customer service, as well as back office ones such as treasury and operations.
- Marketing practices: As the number of options for places where customers can save their money increases, attracting savings from the public faces greater competition. Marketing strategies to support this work include strategic initiatives such as product-launch efforts, tactical promotions that add value to customers, and advertising initiatives that use diverse types of media.
Further Resources Contact Information For more information on ACCION’s savings program, please contact:
Jacqueline Urquizo, jurquizo@accion.org
ACCION International
1401 New York Avenue, NW
Suite 500
Washington, DC 20005
Tel: (202) 393-5113 |