Using Tactics from Motorbikes to Smartphones, Savings Initiatives to Help Bring Financial Security to Millions of Poor People in the Developing World
SEATTLE, Jan. 13 /PRNewswire-USNewswire/ -- The Bill & Melinda Gates Foundation today 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. 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," said 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 percent 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," said 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 programs.
This announcement follows the foundation's one-year review of proposals from leading microfinance networks worldwide. Applicants were evaluated on a range of criteria, including institutional ability to work in multiple countries, previous success in providing microcredit, and willingness to make savings a priority. Lessons from each project will be documented and shared with grantees and the microfinance community.
"The poor have surprisingly sophisticated financial lives and present a rapidly emerging business opportunity for banking in the developing world," said Jonathan Morduch, professor at New York University and co-author of Portfolios of the Poor. "Savings initiatives like these help strengthen and expand financial institutions, enabling them to overcome significant barriers and provide affordable savings accounts to the poor in a sustainable manner."
To date, the foundation's Financial Services for the Poor initiative, which is part of the Global Development Program, has committed $470 million to make financial services widely accessible to the poor and help break the cycle of poverty. The initiative works with a wide range of public and private partners to harness technology and innovation to bring quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world. The foundation believes that setting aside small sums in a safe place allows people to guard against risks, build assets, and provide opportunities for the next generation.
This announcement includes the following grants:
Grantee: ACCION International
Grant amount: $5.8 million
Institutions: BancoSol, Bolivia; Finamerica, Colombia; third institution to be selected
This grant will reach one million new clients in five years. It will help bring savings products to a broader set of clients through a variety of means, including agent banking, mobile banks, and providing access to savings accounts over mobile phones.
Bruce J. MacDonald, +1.617.616.1546, firstname.lastname@example.org
Grant amount: $5.4 million
Institutions: FINCA Uganda, FINCA Ecuador, and FINCA Democratic Republic of the Congo
This grant will reach more than 372,000 new savers in five years. FINCA is well known for its village banking model, where groups gather to receive and repay loans, and discuss loan management. With this grant, FINCA will begin to offer savings to these groups, as well as individual clients through "micro branches" located in rural areas.
Diane Jones, +1.202.352.6475, email@example.com
Grantee: Grameen Foundation
Grant amount: $9.8 million
Institutions: Amhara Credit and Savings Institution, Ethiopia; the Center for Agriculture and Rural Development (CARD), the Philippines; Cashpor MicroCredit, India
This grant will transform three MFIs in Ethiopia, the Philippines, and India into savings-led institutions that will serve 3.6 million new savers within five years. The Grameen Foundation will:
- Work with Amhara Credit and Savings Institution, which already has an extensive branch network in Ethiopia, to increase its ability to provide savings to target groups.
- Work with NGO Cashpor MicroCredit in India to match it with a savings bank, bringing the bank's savings products to the NGO's locations.
- Help CARD market its existing savings products in the Philippines and bring those products to more people using new point-of-service devices and by launching a partnership with an ATM network.
Liselle Yorke, +1.202.628.3560, ext. 128, firstname.lastname@example.org
Grantee: ShoreBank International
Grant amount: $5.5 million
Institutions: Krishna Bhima Samrudhi Local Area Bank, India; Khushhali Bank, Pakistan; National Rural Support Programme Microfinance Bank, Pakistan; BRAC Bank, Bangladesh
This grant will deliver savings products and services to 1.5 million people across South Asia in countries that contain 25 percent of the world's population. ShoreBank will:
- Work with Krishna Bhima Samrudhi Local Area Bank in India, which is already offering credit and savings to the poor, to broaden its reach by sending messengers on motorbikes with handheld devices to rural clients.
- Work with Khushhali Bank in Pakistan, which mainly serves semi-urban areas, to introduce a portfolio of savings products tailored to the poor.
- Create management and business process systems, and train staff to help the National Rural Support Programme Microfinance Bank in Pakistan offer savings to its clients.
- Help BRAC Bank in Bangladesh explore ways to reach the rural poor with savings.
Brian J. Berg, +1.773.420.4664 or +1.312.282.8260, email@example.com
Grantee: Women's World Banking (WWB)
Grant amount: $8.5 million
Institutions: Banco ADOPEM, the Dominican Republic; WWB Colombia; Kenya Women Finance Trust, Kenya; Kashf Microfinance Bank, Pakistan
This grant will reach 3.5 million people in five years by supporting the activities of four WWB flagship network members. WWB will:
- Assist Banco ADOPEM in revamping its savings products to make them better fit the needs of the poor.
- Support WWB Colombia, a newly regulated institution, in mobilizing and managing savings by launching new products, new delivery channels and a new marketing approach.
- Help Kenya Women Finance Trust, which is currently credit-only, conduct market research and product development to create services and products tailored to the poor.
- Work with Kashf Microfinance Bank to place online banking kiosks in Kashf Foundation branches so the foundation's clients, all women, can gain access to savings accounts for the first time.
WWB will also launch a TV serial drama in the Dominican Republic to bring attention to the benefits of savings. WWB will work with the design firm IDEO to design a new product, service, or distribution solution by exploring customers' perceptions of making deposits through correspondent banking, ATMs and mobile phones.
John Keaten, +1.212.784.5701, John@GroupGordon.com
Grantee: World Vision
Grant amount: $3.3 million
Institution: WISDOM, Ethiopia
This grant will offer savings accounts to more than 600,000 rural farmers and the poor in Ethiopia through mobile technologies. It will mobilize savings officers using PDAs and traveling by motorbike to enable client transactions in communities surrounding branch offices.
Rachel Wolff, +1.253.394.2214, firstname.lastname@example.org
Bill & Melinda Gates Foundation
Guided by the belief that every life has equal value, the Bill & Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people's health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people—especially those with the fewest resources—have access to the opportunities they need to succeed in school and life. Based in Seattle, Washington, the foundation is led by CEO Jeff Raikes and Co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett. Learn more at www.gatesfoundation.org or join the conversation at Facebook and Twitter.
SOURCE Bill & Melinda Gates Foundation