The Bill & Melinda Gates Foundation has announced six grants totaling $38 million to help eighteen microfinance institutions (MFIs) provide the poor with safe, affordable ways to save.
Support from the foundation will enable participating MFIs, which currently focus on microcredit, to expand their portfolios and make savings accounts available to an initial eleven million people across twelve countries in Africa, Asia, and Latin America over the next five years. The grants will fund a variety of approaches, such as creating new ways to make deposits and withdrawals, expanding the availability of existing savings products, and funding savings-focused marketing campaigns. Recipients include Chicago-based ShoreBank International, which was awarded $5.5 million to broaden its reach by sending staff on motorbikes with handheld devices to rural clients in India; New York City-based Women's World Banking, which will receive $8.5 million to revamp its savings products to make them better fit the needs of the poor; and Grameen Foundation in Washington, D.C., which was awarded $9.8 million to help transform MFIs in Ethiopia, Philippines, and India into savings-led organizations.
The announcement follows on the heels of the foundation's one-year review of proposals from leading microfinance networks worldwide. Applicants were evaluated on a range of criteria, including institutional ability to work in multiple countries, previous success in providing microcredit, and willingness to make savings a priority. Lessons from each project will be documented and shared with grantees and the microfinance community.
In the past, providing the rural poor with savings accounts has been a challenge because of the high costs for both banks and customers. For banks, the cost of physical buildings with dedicated bank tellers was prohibitive, especially in remote areas or in areas where there was a limited number of clients with small deposits.
"The poor have surprisingly sophisticated financial lives and present a rapidly emerging business opportunity for banking in the developing world," said New York University professor Jonathan Morduch, co-author of Portfolios of the Poor. "Savings initiatives like these help strengthen and expand financial institutions, enabling them to overcome significant barriers and [helping them to] provide affordable savings accounts to the poor in a sustainable manner."