WASHINGTON (Reuters) - Using handheld devices, motorbikes and even smartphones, micro-lenders such as ShoreBank International hope to give poor communities access to safe and affordable ways to save their hard-earned cash.
Such innovation is being driven by a new project funded by the Bill and Melinda Gates Foundation, which said on Wednesday it will give $38 million to help 18 micro-lenders explore ways to make savings accounts available to 11 million poor people across 12 countries in Africa, Asia and Latin America over the next five years.
“This signature package of grants represents our first bold effort with the microfinance community to provide poor people safe places to save their money,” said Bob Christen, director of Financial Services for the Poor at the Gates Foundation.
“We see it as a major step to drive change and help broaden the microfinance business model to include savings,” he said.
Until now, the blossoming micro-credit market has focused on delivering tiny loans to the poor but has failed to master micro-savings. This is mostly because delivering such services is expensive given the limited number of people with small deposits.
Now the foundation, started by billionaire Microsoft Corp founder Bill Gates and his wife Melinda, hopes the grant money will help microlenders find creative ways to give the poor savings accounts using existing client bases in some of the world’s poorest countries.
“We have learned in our work there is a very strong demand from current micro-finance borrowers for savings products,” said Laurie Spengler, president of ShoreBank International.
She said by working with four partner institutions in Bangladesh, India and Pakistan, ShoreBank Financial expects to reach about 1 million micro-savers over the next few years.
“One of our guideposts is how we can work with these four banks to deliver a savings approach that leverages technology to make possible a $1 savings transaction that is safe, accessible and profitable,” she said.
According to the National Bureau of Economic Research, poor household with access to savings accounts are more likely to invest in education and health.
“Despite conventional wisdom, poor people actually do save, even if it’s just pennies each day,” said Alex Counts, president of the Grameen Foundation, inspired by Muhammad Yunus, who won the 2006 Nobel peace prize for pioneering the global microfinance movement through his work in Bangladesh .
Joyce Bontrager Lehman of the Gates Foundation told Reuters the challenge for the microlenders was to design appropriate products that will allow poor households to deposit and withdraw their savings in remote areas.
“Some of the grantees will be doing some market research to see exactly what people do need and what they would use, and how they would use it,” she said.
Among the micro-finance groups benefiting from the Gates grant are Accion International, Grameen Foundation, Finca International ShoreBank International, Women’s World Banking and World Vision.
Editing by Lincoln Feast