State-Owned Retail Banks (SORBS) in Rural and Microfinance Markets: A Framework for Considering the Constraints and Potential

This paper provides a research framework for the United States Agency for International Development (USAID) from the Development Alternatives. Inc. (DAI) consortium's Financial Services Knowledge Generation (FSKG) research team on the constraints and potential in rural and microfinance markets for state-owned retail banks (SORBs).The report provides:

• An update on research activities and findings;
• An outline of the next stages and activities;
• The objectives of continuing research;
• A bibliography with documents, publications and web sites on SORBs;
• Three summary case studies of different types of SORBs;
• Tables containing summary data collected during the survey of SORBs.

The paper states that:

• In many countries, SORBs are the only existing financial institutions in rural areas that have branch infrastructure and institutional knowledge;
• SORBs are important for USAID's development finance agenda and FSKG project, because:
  • Incentives to leverage their advantages in micro and rural finance have worked well,
  • They help preserve the access of low-income firms, farmers and consumers to financial services in rural areas.

The paper describes the following key strategies included in the strategic framework:

• Closure;
• Continued government involvement;
• Creation of new SORBs;
• Privatization.

The paper concludes with pointers for future research and a list of banks for field-study.