MICROFINANCE PUBLICATION ROUND-UP: Savings Groups in Rural Mali, Three Market Archetypes Advancing Financial Inclusion, Long-term Trends in India’s Rural Credit Market

“Final Impact Evaluation of the Savings for Change Program in Mali;” by Bureau of Applied Research in Anthropology at The University of Arizona and Innovations for Poverty Action (IPA); published by Oxfam America and Freedom from Hunger; April 2013; 215 pages; available at http://www.oxfamamerica.org/issues/community-finance/files/final-impact-evaluation-saving-for-change

This report presents the results from a study conducted by The University of Arizona and Innovations for Poverty (IPA) between 2009 and 2012 intended to explore the impact of savings groups in 500 villages in rural Mali, where 82 percent of surveyed households live on approximately USD 1.25 per day and the “typical village is more than 14 miles from a paved road.” In its evaluation of the Malian iteration of the “Saving for Change” program, which “promotes resilience and the accumulation of productive financial assets for nearly 680,000 members in 13 countries throughout Africa,” the authors found that from 2009 to 2012, households in villages with access to savings groups experienced an eight-percent increase in food security, a 13-percent increase in the value of livestock and a 31-percent increase in savings. The researchers also found that housing quality improved in participating villages as “families living under hard metal roofs, as opposed to wood and mud roofs, increased by 11 percent.” According to the authors, “this study confirms that savings groups contribute substantially to the resilience of people living on the edge of hunger,” and indicates “that access to basic financial services, even non-formal ones, can help very poor families escape chronic hunger.”

“Advancing Financial Inclusion through Use of Market Archetypes;” by Xavier Faz and Ted Moser; published by CGAP (Consultative Group to Assist the Poor); May 2013; 27 pages; available at http://www.cgap.org/publications/advancing-financial-inclusion-through-use-market-archetypes

This report examines financial inclusion though the lens of three “market archetypes,” under which countries with similar economic, demographic and policy environment characteristics may be positioned to benefit from similar strategies for increasing financial inclusion. The “Mobile Leapfrog” market archetype includes countries with low income per capita and low population density, where “individuals live too far apart and account balances are too small for widespread bank branch economics to work well.” While the customer base of commercial banks is approximately 20 percent of the population in Mobile Leapfrog markets, mobile network operators (MNOs), such as Telenor Pakistan of Pakistan and Safaricom of Kenya, “are in touch with 65-80 percent of the population.” MNOs are deemed “best positioned to drive financial inclusion” in these markets as they “often take the lead in launching mobile banking initiatives.” The “Convergence Battle” market archetype includes countries such as Brazil, Mexico and South Africa. The higher income per capita and denser populations of these countries enables commercial banks “to have a relatively strong financial inclusion footprint” that reaches approximately 60 percent of the population. But the report notes that microfinance institutions (MFIs) “in this environment struggle to generate sustainable financial results at reasonable interest rates because labor costs are too high.” The “Pervasive Social Banking” market archetype includes densely populated countries with low income per capita, such as Bangladesh, India and Indonesia. These markets are characterized by “the pervasiveness of social banking [in which government policy has driven financial inclusion among the poor while achieving sustainable economics, thus enabling the government to create significant social impact with modest taxpayer subsidies], implemented through noncommercial banks and through government mandates for commercial banks to partially address social equality.” The authors argue that the advancement of financial inclusion over the “past few decades” in these markets is a result of collaboration between the public and private sectors and that digital cash models can increase financial access by increasing convenience for customers and reducing costs for providers.

“Persistence of Informal Credit in Rural India: Evidence from ‘All-India Debt and Investment Survey’ and Beyond;” by Narayan Chandra Pradhan; published by Reserve Bank of India; May 2013; available at http://www.rbi.org.in/scripts/PublicationsView.aspx?id=14986

This report examines surveys conducted by the Reserve Bank of India and the National Sample Survey Organization of India intended to examine “informal credit in rural India” between 1951 and 2012. While policy interventions over the past decade have led to the doubling of agricultural credit, the surveys found that “the limited access of small and marginal farmers to institutional credit continues to be a matter of concern.” The author argues that “untimely” credit, “inadequate” performance of public sector banks in rural and agricultural lending, and the high interest rates charged by microfinance institutions (MFIs) have restrained the access of rural farmers to credit. Among the types of institutional credit agencies serving rural India, commercial banks and cooperative societies “were the two most important agencies,” as they collectively provided 91 percent of the total debt advanced by agencies and accounted for 52 percent of outstanding debt as of 2002. The “key finding is that informal credit has certainly declined as a percentage of total debt,” which reflects “the government’s efforts to register and regulate professional moneylenders.” But because formal financial institutions tend to restrict their lending in rural areas to the agricultural sector, the report highlights the importance of the informal credit market in rural India. “Those in the rural credit market prefer to use informal sources of credit despite the fact that the interest rates are much higher…informal sources are willing to lend money more freely without collateral and on the borrower’s mere promise to repay.”

By Sam Allmendinger, Research Associate

Sources and Additional Resources:

“Final Impact Evaluation of the Savings for Change Program in Mali,”
http://www.oxfamamerica.org/issues/community-finance/files/final-impact-evaluation-saving-for-change

“Advancing Financial Inclusion through Use of Market Archetypes,”
http://www.cgap.org/publications/advancing-financial-inclusion-through-use-market-archetypes

“Persistence of Informal Credit in Rural India: Evidence from ‘All-India Debt and Investment Survey’ and Beyond,”
http://www.rbi.org.in/scripts/PublicationsView.aspx?id=14986

MicroCapital Universe Profile: CGAP (Consultative Group to Assist the Poor)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

MicroCapital. May 16, 2013, “MICROFINANCE PUBLICATION ROUND-UP: Remittances to Latin America and the Caribbean, Savings Groups Leading to Advocacy, Microinsurance in the Philippines,” https://www.microcapital.org/microfinance-publication-round-up-remittances-to-latin-america-and-the-caribbean-savings-groups-leading-to-advocacy-microinsurance-in-the-philippines/

MicroCapital. December 12, 2012, “MICROCAPITAL BRIEF: West African Banks Asked to Lower Interest Rates by Central Bank of West African States (BCEAO in French),” https://www.microcapital.org/microcapital-brief-west-african-banks-asked-to-lower-interest-rates-by-central-bank-of-west-african-states-bceao-in-french/

MicroCapital. May 13, 2013, “MICROCAPITAL BRIEF: G20’s Global Partnership for Financial Inclusion Publishes Data on 192 Countries,” https://www.microcapital.org/microcapital-brief-g20s-global-partnership-for-financial-inclusion-publishes-data-on-192-countries/

MicroCapital. May 11, 2013, “MICROFINANCE PUBLICATON ROUND-UP: Rural Finance in Laos, Micro-Health Insurance in Rural India, Distribution Models in Mobile Financial Services,” https://www.microcapital.org/microfinance-publicaton-round-up-rural-finance-in-laos-micro-health-insurance-in-rural-india-distribution-models-in-mobile-financial-services/

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