The Bill & Melinda Gates Foundation has announced $38-million in new grants designed to help some of the world's leading microfinance institutions (MFIs) provide the poor with safe, affordable places to save their money.
The six grants will help 18 MFIs, which currently focus on microcredit, expand their portfolios and make savings accounts available to an initial 11-million poor people across 12 countries in Africa, Asia, and Latin America over five years.
The grants will create new ways for the poor to make deposits and withdrawals, expand the availability of existing savings products, and fund savings-focused marketing campaigns.
"This signature package of grants represents our first bold effort with the microfinance community to provide poor people safe places to save their money," says Bob Christen, director of financial services for the poor at the Bill & Melinda Gates Foundation. "We see it as a major step to drive change and help broaden the microfinance business model to include savings."
Microfinance has improved the lives of millions of poor people by offering small loans. Few of these institutions have offered savings accounts, and more than 90% of the world's poor still lack access to financial services and resort to risky, expensive, and inefficient ways to save.
A National Bureau of Economic Research report suggests that poor households with access to savings accounts are more likely to invest in education, increase productivity and income, and reduce vulnerability to illness and other unexpected events.
Providing access to safe, affordable savings accounts has been a challenge because of the high costs for both banks and customers. For banks, the costs of physical buildings, with dedicated bank tellers, are expensive, especially in remote areas or where there is a limited number of clients with small deposits. Poor clients often live far from banks so the cost to reach a branch may exceed the amount of their deposits.
"Despite conventional wisdom, poor people actually do save, even if it's just pennies each day, but there have been very few accessible and safe options available to them until recently, when breakthroughs pioneered by the Grameen Bank have shown what is possible," says Alex Counts, president of Grameen Foundation.
"Microfinance institutions, because of their established relationships in these communities and ability to bring the transaction to the client, are well-placed to provide safe access to formal savings accounts."
The grants will use a variety of approaches to offer savings accounts to poor people. ShoreBank International, for example, will broaden its reach by sending staff on motorbikes with handheld devices to rural clients in India. Women's World Banking will revamp its savings products to make them better fit the needs of the poor and fund marketing campaigns in the Dominican Republic. The Grameen Foundation will work with its partner MFIs to ensure they have the business systems and staff to manage emerging client savings programmes.