A Symposium on Savings-Led Microfinance and the Rural Poor

This paper argues that while microfinance institutions effectively deliver services to cities and densely populated rural areas, they have had limited success in serving rural areas.

The paper further points out that Revolving Credit and Savings Societies (ROSCAS) and other locally controlled organizations exist in every village. It puts up a case for modernization and empowerment of these institutions so that they become platforms for literacy, health education and business concerns.

The paper highlights some of the salient features of savings-led microfinance programs:

• Locally controlled self-help groups are trained to mobilize their own savings and make loans at interest to their members, instead of setting up new microfinance institutions;
• Savings-led programs build equity within the group and the interest paid on the loans contributes substantially to building the group's fund;
• Training is conducted by locally recruited staff which reduces the transaction costs;
• If the local institution supporting the groups fails, the groups can continue on their own once they are trained.

The paper enlists five case studies to highlight the impressive scale and the low cost of the savings-led initiatives across the world where this approach has succeeded. These include:

• PACT's Women's Empowerment Program (WEP) in Nepal;
• CARE's Mata Masu Dubara (Women on the Move);
• Self-Help Groups Movement in India;
• Community Savings Funds in Mexico;
• Ashrai in Bangladesh.