Where does Savings fit into microfinance systems?

This post is also available in: Tiếng Việt (Vietnamese)

Introduction

In Cambodia, Vietnam and Laos, the launch of the most “rural credit” institutions and projects dates back to the early 90s. Today, the prospect of the institutionalization of certain projects has revived debates on where to find the resources, on the sustainability of the financial systems and on the involvement of the beneficiaries. Savings are central to these issues. However, operators are virtually unanimous in stating how difficult is to mobilize savings. As a result they tend to be divided on what strategy to employ with regard to mobilizing savings. There are many discussion between those in favour of “savings first” and those in favour of “credit first”. Also some consider that the savings should be mobilized voluntarily, others possibly obligatory.

In fact, technical, institutional and even ideological factors sometimes combine to determine a policy that often results in confusion and misunderstanding between certain operators. This document attempts to analyze this issue from its main angles. In order to clearly show how various situations can dictate the differentiation of the technical means used, the situation in the countries of the Indo-Chinese peninsula will be compared with that of the countries of West Africa. For the most part the analysis of the South-East Asian countries draws on Gret’s own experience. Thus, the ultimate goal of the document is to provide a point of view, which is intended neither to be exhaustive, nor representative of the situation currently taking place as a whole. The document also describes the factors determining the technical elaboration of credit protocols of Gret’s projects in Cambodia and in Vietnam, the way in which the situation has evolved with regard to the problem of savings, and finally the consequences of this evolution on savings mobilization strategy.