IFC champions microsavings offerings

The Deposit Assessment in India notes that microsavings are critical to improving access to basic financial services. The report estimates that 2.7 billion people cannot access services such as savings accounts, and further notes that 22% of all people in South Asia are entirely "unbanked," constituting the highest percentage globally. Although India is largely recognized for its microcredit and microfinancing groups, few of these institutional lenders actually offer savings capabilities.

"Based on the findings, IFC is identifying partner banks and microfinance institutions to help expand their reach and offerings and increase financial inclusion across South Asia," Jennifer Isern, Head of IFC's Access to Finance Advisory Program in South Asia, said publicly.

There are unmistakable difficulties surrounding microsavings. Analysts have long pointed out that, while the average income of workers in impoverished areas falls between $1 and $2 a day, these people will only sporadically receive their pay. As such, a secure and convenient bank to stash their earnings is more difficult to find. A handful of larger MFIs provide microsavings services, but products are still scarce, expensive and high maintenance relative to the credit lending tools available.

The merits of microlending have recently been called into question following an inundation of reports citing cases of at times violent debt collecting tactics by lenders in Andhra Pradesh. However, private equity is no stranger to microfinance, with firms such as SKS Microfinance and Grameen, among the two wealthiest and most recognized MFIs. Firms such as Sandstone Capital, Kismet Capital, SVB India Capital Partners, Sequoia Capital and Columbia Ventures Corporation have in the past invested in SKS, which launched a highly debated IPO last year.

Where private investment in the microsavings sector is concerned, the niche industry has relied on charitable organizations which do not seek fast return or performance. An example of this is the Bill and Melinda Gates Foundation, which one year ago invested $38 million into 18 MFIs earmarked for microsavings services in India, the Philippines and Ethopia. Sri Lankan pioneer in the field, Grameen Bank, was among its recipients.

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• Topics
• South Asia
• International Finance Corporation