Attracting the unbanked – Preliminary guideline for maximizing existing infrastructure through serving untapped markets

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INTRODUCTION

Increasing outreach to the ‘unserved’ is a current priority among many microfinance experts and donors. To date this discourse has largely focused on determining how best to deliver financial services to those without access: low income households living in rural and/or remote areas. Factors such as low population density, weak infrastructure or lack of regular cash flow have meant that the provision of financial services to this market has often been costly and as a result limited.

However, banking the ‘unbanked’ is not only about those who living beyond the reach of existing microfinance institutions (MFIs). It is also about those who live within access of one or more MFIs. Indeed, both the share of the borrower’s wallet and the share of the market within such areas are often lower than anticipated. Evidence from India and Peru indicates that microfinance debt as a percentage of all household debt is often around 30% (Chen and Snodgrass, 2001; Dunn and Arbuckle, 2001). In Bangladesh where microfinance services are widely available, Rutherford (2002) found that among all households surveyed over the course of a year microfinance transactions do not exceed more than 15% of household financial transactions.