SESSION 3

BASIC PRINCIPLES OF SAVINGS MOBILIZATION

OBJECTIVE
1. WHETHER THE COLLECTION/INTERMEDIATION IS THE RIGHT CHOICE 2. REGULATORY/SUPERVISORY AUTHORITIES NEED THEM FOR LICENSING MFIs 3. FOR IMPROVING SAVINGS PERFORMANCE TO ENABLE THE INCREASE SCALE AND ENTER THE MICROFINANCE MARKETS

PRINCIPLE 1
POOR PEOPLE IN DEVELOPING COUNTRIES SAVE. THE JOB OF THE MFIs IS NOT TO TEACH THEM TO SAVE, BUT TO LEARN THEIR NEEDS AND DESIGN AND DELIVER PRODUCTS AND SERVICES THAT MEET THEIR DEMAND SECURITY LIQUIDITY CONVINIENCE CONFIDENTIALITY A CHOICE OF PRODUCT APPROPRIATE TO MEET THEIR NEEDS HELP AND FRIENDLY SERVICES POTENTIAL ACCESS TO LOANS

PRINCIPLE 2
FOR CREDIT, THE MFI MUST TRUST THE CLIENT. BUT FOR SAVINGS, IT IS THE CLIENT WHO MUST TRUST THE MFI. MFIs MUST BE: 1. TRUSTWORTHY 2. SECURED 3. STABLE 4. RECEPTIVE TO NEEDS OF CLIENT . CLIENTS WANT TO BE: 1. TRAVEL LONG DISTANCES/STAY IN QUEUES FOR LONG 2. OPPORTUNITY COST FOR TIME 3. LOCATION 4. HELPFUL STAFFS 5. WELL TRAINED STAFFS 6. CLIENTS ARE POOR/ILLITERATE BUT RATIONAL

PRINCIPLE 3
CERTAIN BASIC PRECONDITIONS ARE NEEDED FOR MOBILIZING VOLUNTARY SAVINGS FROM PUBLIC 1. THE POLITICAL ECONOMY 2. THE POLICY AND REGULATORY ENVIRONMENT 3. PUBLIC SUPERVISION-GOVERNMENT (SINCE MONEY IS MOBILIZED FROM THE PUBLIC) 4. STRONG INSTITUTIONAL PERFORMANCE RECORDQUALITY OWNERSHIP, GOVERNANCE, MANAGEMENT CAPACITY 5. PREPARATION FOR FAR-REACHING REFORMS

PRINCIPLE 4
OWNERS, BOARD MEMBERS, AND MANAGERS OF REGULATED MFIs MUST MEET LEGAL AND REGULATORY REQUIREMENTS FOR ACCOUNTABILITY AND QUALIFICATIONS

PRINCIPLE 5
REGULATED COMMERCIAL MFI MUST MOBILISE SAVINGS FROM THE PUBLIC, AND NOT FROM THE POOR ALONE 1. AVOID TRANSACTION COST-MAY PROBABLY NEED TO RAISE THE AMOUNT OF DEPOSITSTHE POOR MIGHT NOT MEET 2. INCREASE INTEREST RATE 3. REDUCES RATE OF REDRAWALS

PRINCIPLE 6
THE NUMBERS OF BORROWERS CAN BE CONTROLLED BY THE NUMBER OF LOANS APPROVED

PRINCIPLE 7
SAVINGS IS NOT ONLY A SERVICE AND A SOURCE OF FUNDS BUT ALSO A LIABILITY 1. INTERNAL FRAUD 2. SECURITY MEASURES 3. LOAN DEFAULT 4. LOSS FROM INVESTMENT 5. BUDGETING FOR NEW OPERATING COST

PRINCIPLE 8
NEW KINDS OF PRODUCTS REQUIRE NEW TRAINING FOR STAFF AND MANAGEMENT 1. PRODUCT DESIGN, PRICING AND MAJOR DELIVERY 2. TRAINERS OF TRAINERS 3. PERFORMANCE-BASED INCENTIVES FOR MANAGEMENT/STAFF

PRINCIPLE 9
MFIs COLLECTING FINANCE NEED A SPECIAL SAVINGS PRODUCT/INDIVIDUAL LOAN PRODUCT 1. FIXED DEPOSIT/ MATURITY PERIOD

PRINCIPLE 10
MOBILIZING SAVINGS TAKE TIME AND PROPER SEQUENCING 1. ASSESS INTERNAL STAFF/INSTITUTIONAL CAPACITY 2. CONDUCT A RESEARCH 3. DO A PILOT PROGRAMME 4. DEVELOP CRITERIA FOR PILOT PROGRAMME 5. SELECT PILOT AREAS