NOTE 3: ON SAVINGS MOBILIZATION
(Continued)
In the previous note we observed that in the poorer
countries more savings were made and that the lower and medium income classes
are the ones that save most. Now we are going to analyze the savings issue
related to the Microfinance Institutions (MFIs). In this sense the source of
information was the MFIs registered in MIXMARKET at worldwide level, these
totalled 2.446. However, reporting their information to this organization is
voluntary, so each MFI decides what information is going to report or if it is
going to report any numbers besides their profile. To analyze the savings it
was required the loan and savings portfolios as well as the number of debtors
and savers for 2012, this reduced the MFIs numbers to 1.971; but, in any case,
it is a representative sample. The different regions were included to compare
the patterns of the MFIs in each of those. The regional grouping of the
countries was that of MIXMARKET.
In the first table the comparison criteria used between
ranks was the savings as a percentage of the loans, in such a way that if the
MFIs did not have any savings the value was zero, if all the loan portfolios was
finance with the savings the value was 100%, the ranks were divided in three
categories: From 1% to 29%, the second rank from 30% to 49% and the third goes
from 50% to 100%. The savings that exceeded the loan’s portfolio and its
percentage being more than 100% were analyzed in the second table.
As it can be observed, in the highest savings participation
in the loan portfolio (50% to 100%), the average savings represent 62,1% in all
the category, being more important the Latin American and the Caribbean
region with 69,7%. As it can be seeing, as a whole, the savings portfolio is
funding something over more than half of the Microloans, considering that the
MFIs in this category can receive legally deposits from the public, this
percentage is still low, so it can be assumed that the effort to bring in
savings is limited. It is important to mention that this rank represented only
20% of the countries registered in MIXMARKET.
In the second rank from 30% to 49%, savings funding
the loans represented about half of the average percentage of the first rank
(37,0%) and the region with more weight (40,0%) was Africa.
This is the rank with more countries (32,9%), so it can be assumed that this is
also the highest worldwide tendency observed.
In the third and lowest rank 1% to 29%, the savings
only funded a fifth part of the loans of the observed in the first rank (14,0%)
and still prevails the East Asia and the
Pacific region (22,7%). However, due to the fact that the average falls due to
one of the regions; if we recalculate the average without this region, the
average steps up to 16,4%, reducing the comparison with the first rank to one
quarter part. In this ranks there is a fall in the presence of countries
(27,1%), staying yet the first rank as the lowest of all the country’s rank.
In the last rank with the MFIs that do not mobilize
savings the 20% was surprisingly low, which confirms the lack of interest of
the MFIs to mobilize savings, as 80% of these can receive deposits.
My perception over the limited participation of MFIs
in savings as a source of funding can be due to several reasons: (1) The
historical roots of the MFIs were ONGs which their sources of funding were
limited to equity, donations and soft loans from third parties, as these evolved
towards Microfinance from the 90s on; in part due to legal changes, in part
because of the cooperative equity that at that time was not regulated by the
banking supervisor and in part because many ONGs became converted to banks, the
possibility to mobilize savings was opened to these institutions, but their
culture continue basically to fund with loans; (2) The lack of experience in
the savings mobilization and promotion; (3) The easiness of access to the
traditional sources of funds of the MFIs trough equity donations and soft loans
kept being the central focus of their managers and directors, in what they knew
well, but the 2008 crisis closed many of these sources and afterwards step up
the cost of the money; (4) Being the Microloans products of demand; that is,
that the potential clients ask for them without the need to offer them, the
MFIs had no experience in marketing and selling to attend the requirements
needed to promote savings and (5) In the trajectory of the MFIs, the aspect and
the physical presence was not important, so the Image of the premises was poor
to attract clients that only wanted to deposit their money in a safe place and
also the branches were located near their local Microlending market and far
away from the market of those who only want to deposit their money in a solid
and trustworthy place. The evidence of this perception can be observed when
many successful Microloan clients keep their savings in commercial banks when
they reach the minimum required amount demanded by these institutions.
The
second table shows an aspect apparently contradictive as keeping much savings, even
exceeding the loan portfolio, in an MFI is ideal to strengthen the institution.
However, it is not the case, because interests must be paid (Usually higher
than those paid by the banks to be competitive in this market) so if the excess
money is not lent it will be causing a financial cost without the counterpart
of income, that will affect the profits of the MFI, even causing it to fall in
losses. Maybe many of you will argue that this is the reason why MFIs ask for
loans according to the Microloan demand; however, there are four reasons not to
fund mainly with loans: (1) the cost of the loans, even the soft ones, will
always be higher than that of the savings; (2) The interests received by the
excess savings when invested, will be much lower than if these funds were lent;
(3) The maturity of the funding loans will be for the total and
will occur at a fixed date, while the
atomized nature of the
savings makes improbable that all the savers withdraw the money at one time and
(4) Attracting savings is controlled by raising or lowering the interests rates
and using marketing, at the same time all this actions help to have a better
control on the cost of the money. As a general rule, the MFIs that are capable
to mobilize savings should recur for loans as a complementary source for
funding, so that the main source of funds may come from the low cost deposits
from the public.
Although
in the second table the presence of the MFIs whose savings overcome the loan
portfolio is very small (3,9%), it is also true that those which show more than
twice the loan portfolio in savings are nearly half of the group, being this incomprehensible,
this minority show either an incapacity to lend or have a wrong financial sense
of the importance of keeping a high liquidity.
I
am convinced that the MFIs have an enormous potential to lower the interest
rates by founding mainly with the cheaper money of the deposits from the
public. When these can receive deposits and do not do it as much, they are
increasing the costs of the Microloans for their clients. As an example there
is the region of Middle East and North America were the loans are being funded
with little savings (3,3%), being able to reach in their huge potential markets
lower cost funds that can also strengthen the national family savings in their
countries.
Jose
Linares Fontela
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