Towards a more market-oriented approach to credit and savings for the poor
Over the last decade a number of similar initiatives to provide credit and savings to the poor have been evolving which treat the poor as commercial clients rather than 'beneficiaries'. These initiatives are proving in a variety of cultural settings that the poor are able to save and to repay loans made at unsubsidized rates of interest.This article argues that credit and savings services for the poor are provided on a scale appropriate to the market (loans and savings services in the range of $15–$1,000) on a sustainable basis (high recoveries, high mobilization of savings on a break-even or profitable basis), then the clients themselves have proven that the service is justified. A distinctive and universal characteristic of these programmes, however, is that it may take some years of operation before these programmes achieve a critical mass of operations which allows them to be self-sustaining financial entities. This is where donor and government support can play a critical promotional role. Finally, this paper suggests that if the early indications of success throughout the world continue, with appropriate support from donors and governments, it is conceivable that hundreds of millions of clients could be benefiting from these services by the end of the decade.
Building banking from below in Bangladesh
In Bangladesh, a poorly performing formal financial sector runs parallel to a burgeoning and innovative microcredit industry run by NGOs. The success of the group-based microcredit formula originating with Grameen Bank is well-known; the expansion of Bangladesh's microcredit industry is also partly the result of the supervisory system created by the apex organization, PKSF. As concern increases about how to cater for the financial needs of the poorest, who are unable to benefit from microcredit, attention is focused on savings accounts to provide poor people with security. This article proposes the establishment of a savings guarantee foundation in Bangladesh which would have the function of regulating savings accounts with NGOs, guaranteeing people's savings with certified NGOs, and researching appropriate savings and insurance products for poor people.