Microsavings and Privacy

One of my favorite moments of the recent conference held by the College of Agricultural Banking and the Centre for Micro Finance was Chetna Sinha’s description of her experience on how to effectively offer savings to microfinance clients. Sinha is the founder of Mann Deshi Mahila Sahakari Bank, an MFI located in Maharashtra that focuses on providing a wealth of services to their poor women clients. Mann Deshi is not a Non Banking Financial Company (NBFC) or NGO, but an actual registered cooperative bank, so like the more famous Gujarat based SEWA Bank, Mann Deshi is legally allowed to offer savings to their clients.

Sinha explained that many of her clients were unenthusiastic about saving if that meant having to go to a bank to make a deposit. The first reason why women might not want to take the time to go to a bank is intuitive. Going to a bank may represent a high transaction cost, both in the time it takes to get to the bank and the cost of the transport to get there. The second reason surprised me. Sinha believes that poor women do not want to be seen going to the bank to make a deposit because members of the community might see this and then seek her out for money. Worst case scenario, this member of her community might be her husband who wants to use the money for scurrilous purposes.*

This same argument holds true even more strongly for saving in an SHG. Quite reasonably, a large portion of poor women who want to save, may not want to make the amount public. SHGs may work well for small weekly savings payments, but surely not as well when a member’s family receives a large windfall and does not want to tell the world.

Sinha’s answer is that you must go door to door and collect savings in a structure that fits the clients needs. Generally this is structured as a commitment device, where the Mann Deshi member agrees to deposit a certain amount daily, monthly or weekly, but Sinha made it clear that the bank would be flexible if the client chose to make a larger payment into their account. But this means the transaction costs of mobilizing savings is assumed by the bank. This is probably generally a net gain for society as the bank may be able to have a collection officer spend the day attending to a number of clients, but it does make sustainability, much less profitability, tough on the bank. Sinha mentioned several times during her speech how difficult it has been to offer savings in a way that was sustainable for her organization and attractive for clients. Another reminder that nothing is as easy for MFIs as disbursing and collecting loans!

*Men are always getting an unfair rap in microfinance, and I want to apologize to all of my fellow sex for propagating this.