Microfinance: The Power of Saving

Greetings to the readers of the CRS blog! My name is Melita Sawyer, and I work at CRS’ Baltimore office, providing technical advice on savings-led microfinance projects. This is my first blog of what’ll be a regular post. I’m looking forward to sharing our experiences, challenges, and successes in expanding access to financial services to the people CRS serves around the world.

I’ve just gotten back from a great conference at Tufts University–Microfinance from Below: The Power of Savings and Savings Groups in Frontier Economies–sponsored by the Feinstein International Center at Tufts University and Oxfam America. Readers of the CRS blog, and in particular Ben Hess’ great posts from Guatemala, might know that what we call “savings-led microfinance” is now a central focus of our microfinance programs at CRS. Why?

Although global poverty rates have fallen over the past two decades, more than one billion people around the world still live on less than US $1 a day, and these people are largely excluded from financial services- even those provided by microfinance institutions. For example, 62% of adults in Uganda have no access at all to formal or informal financial services! (For excellent data on financial coverage, check out the FinScope studies).

Microfinance institutions and banks aren’t yet reaching these people because the transactions are too small, the communities too isolated, or the perceived risks too great.

So how can we extend finance to this vast number of unserved people relatively quickly, inexpensively and sustainably?

Our experience, and the experience of colleagues at organizations like CARE, Oxfam, and PACT, has shown that savings-led microfinance is an incredibly powerful and sustainable tool for providing financial services to even the most difficult to reach or vulnerable communities. And this conference provided a great opportunity to share the latest innovations and discuss challenges- for lots of good reading, check out the conference papers.

One particular moment of the conference really stuck in my head and reinforced to me why CRS is active in savings-led microfinance. During his keynote speech, Bob Christen, Director of Financial Services for the Poor at the Bill & Melinda Gates Foundation, challenged the audience to imagine what life would be like without access to any financial service.

I’m going to challenge you to do the same thing: Take a minute to truly reflect on how different your life would be without any financial services. Imagine away your bank account. You save by hiding money in a secret spot around your house. You have no credit card. No health insurance. No 401K or other retirement account. No car loan, student loan, business loan, nor a mortgage. No savings account to save for your child’s college education. You get the idea.

Now, also imagine that your parents’ didn’t have access to any of those services either. How would your life be different? How would your parents’ and your children’s lives be different? How would you pay to educate yourself or your kids? How would you prepare for emergencies like sickness or death of a family member? How would you make sure that there is money to buy food everyday, back-to-school clothes or birthday gifts? And how would you work to ensure that your children have more opportunities than you did?

Without any mechanisms to help manage your finances, it would be incredibly difficult to meet those financial needs and improve your family’s life. That’s why CRS is using savings-led microfinance to help poor and vulnerable people have a safe place to save, borrow, access funds in emergencies, and most importantly, manage their scarce resources better.

CRS serves the poor in more than 100 countries on five continents and ranks among the world’s major players in microfinance. Its investments in microfinance have helped to eliminate sources of economic injustice around the world. Donations to the Microfinance Lifeline Fund expand and strengthen CRS’ microfinance programs.

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One Response to “Microfinance: The Power of Saving”

  1. Debbie Says:

    Thanks for bringing savings-led microfinance overseas more to life by showing how lives in the U.S. would be drastically less secure without access to financial services. Eye-opening.

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