BEYOND MICROCREDIT: THE ROLE OF SAVINGS BANKS IN MICROFINANCE potx

BEYOND MICROCREDIT:

THE ROLE OF SAVINGS BANKS

IN MICROFINANCE

Experiences from Latin America,

Africa and Asia

PERSPECTIVES

59

July 2009

BEYOND MICROCREDIT:

THE ROLE OF SAVINGS BANKS

IN MICROFINANCE

Experiences from Latin America,

Africa and Asia

ACKNOWLEDGEMENTS

WSBI wishes to thank all its member banks which have contributed to

this publication through the provision of input, case studies and figures.

The WSBI Institutional Relations team – Anne-Françoise Lefèvre, Hugues

Kamewe, Mina Zhang, Angela Arevalo, with the assistance of Juana

Muys Ramirez and Seth Landau – was responsible for the development of

the different reports presented in the document.

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TABLE OF CONTENTS

Foreword 9

Section 1.: Microfinance: Description and recommendations

for enabling better development 11

1. Introduction: Characteristics of microfinance 13

1.1. What is microfinance? 14

1.2. Microfinance – broader than microcredit 15

1.3. Diversity of players 16

1.4. Microfinance and socially committed retail/savings banks 19

1.4.1. WSBI members: managing the double bottom-line

for consumer benefit 19

1.4.2. Microfinance – An institutional commitment and

a responsible business approach 21

1.5. Summary of the WSBI members’ microfinance approach

by region 22

1.5.1. Latin America 22

1.5.2. Africa 24

1.5.3. Asia/Pacific 26

2. Towards an enabling regulatory and supervisory framework 27

2.1. Tailoring frameworks to national circumstances 28

2.2. Gearing regulations towards activities rather

than institutions 28

2.3. Encouraging a diversity of players in a market-driven

environment 29

2.4. Making regulation proportionate to the expected benefits 29

2.5. Removing restrictions to microfinance activities and

associated prudential requirements 30

2.6. Allowing for increased deposit-taking activities 30

2.7. Allowing the recycling of deposits into lending 31

2.8. Revising regulations for payment systems 31

2.9. Encouraging linkages between banks, microfinance

institutions and other retail outlets 32

2.10. Implementing business rules to ensure

consumer protection 33

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Section 2.: WSBI members’ experiences: A presentation

of regional leaders 35

Report 1. Microfinance in Latin America – The leadership of

WSBI members 37

1.1. The context: Microfinance in Latin America 38

1.2. Microfinance as carried out by WSBI Latin American

members 39

1.3. Microfinance products and services 43

1.3.1. Microcredit 43

1.3.2. Savings 46

1.3.3. Remittances 50

1.3.4. Insurance 53

1.4. Current trends 55

1.5. Short case studies of selected members 56

1.5.1. Peru - Federación Peruana de Cajas Municipales

de Ahorro y Crédito (FEPCMAC) 56

1.5.2. Chile – BancoEstado 57

1.5.3. Colombia – Banco Caja Social Colmena– BCSC 58

1.6. Bibliography/works cited 59

Report 2. Microfinance Services by Savings Banks in Africa –

The Sleeping Giants have started moving, but where are they going? 61

2.1. Summary 61

2.2. Main characteristics of microfinance in Africa 63

2.3. Savings banks in the microfinance landscape in Africa 66

2.4. Key features of African savings banks 68

2.4.1. Accessibility 68

2.4.2. Proximity 69

2.5. Products and services 70

2.6. Lending experiences 71

2.6.1. Retail lending: savings banks’ experiences

across Africa 72

2.6.2. The provision of microcredits 74

2.6.3. Small savings schemes 78

2.7. Diversifying into insurance and payment services 81

2.7.1. Commercialising insurance schemes 82

2.7.2. Payment facilities 83

2.8. Conclusions 87

2.9. Bibliography/works cited 89

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Report 3. Microfinance in Asia/Pacific – Experiences of WSBI members

3.1. Snapshot of Microfinance in Asia/Pacific 91

3.1.1. Market structure and outreach 91

3.1.2. Microfinance actors 92

3.1.3. Microfinance models 93

3.2. WSBI members’ intervention in microfinance in Asia/Pacific 94

3.2.1. Profile of WSBI members in Asia/Pacific 94

3.2.2. Main characteristics of WSBI Asian members’

microfinance activities 94

3.3. Selected case studies from members 96

3.3.1. Hatton National Bank (HNB), Sri Lanka –

Rural savings mobilisation and social development

through the Gami Pudubuwa programme 96

3.3.2. Vietnam Bank for Agriculture and Rural

Development (VBARD) – Services to rural market 100

3.3.3. National Bank for Agriculture and Rural

Development (NABARD), India – Self-Help Group

model to contribute to poverty alleviation in

rural areas 103

3.3.4. China Postal Savings Bank (CPSB) –

Accessible small-scale savings products 105

3.3.5. National Savings Institute (NSI), India –

Promotion and facilitation of small-scale savings 106

3.3.6. Government Savings Bank of Thailand (GSB) –

People Bank’s programme with a specific focus

on SME financing 107

3.3.7. Bank Simpanan Nasional (BSN), Malaysia –

Microfinance to finance micro and small enterprises 110

3.4. Bibliography/works cited 112

Annexes 115

Annex 1: WSBI Latin American members list 115

Annex 2: WSBI African members list 116

Annex 3: WSBI Asia/Pacific members list 117

Annex 4: General bibliography/works cited 118

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I am delighted to present to you a new issue of Perspectives which

focuses on microfinance and the role of WSBI members. Access to

financial services at the microlevel has been shown to be critical for

developing economies and individual capacities – especially among poorer

populations. Savings and socially committed retail banks have long worked

towards financial inclusion and the betterment of their communities.

This issue of Perspectives examines the role of WSBI members in

improving access to finance and enhancing microfinance activities in the

Asia/Pacific, African, and Latin American regions. The document also

examines what must be done to enhance microfinance activities

throughout the world – turning a focus on microcredit into a focus on

general financial inclusion.

The world-wide movement towards financial inclusion is critical for

economic development in all geographic areas. This publication confirms

that savings banks and socially responsible retail banks play a leading role

in this effort and offer innovative and important products to serve middle

and lower income clients.

WSBI aims to continue to work with its members and international

organisations to capitalise on the progress being made amongst our

members throughout the world. I hope that this publication provides the

reader with a good overview of some of the important issues related to

microfinance.

Chris De Noose

Managing Director, WSBI

FOREWORD

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SECTION 1.

MICROFINANCE: DESCRIPTION AND

RECOMMENDATIONS FOR ENABLING

BETTER DEVELOPMENT

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