Microfinance and Small Deposit Mobilization: Fact or Fiction?

MIX Data Brief No. 2: This paper explores the question of whether deposit mobilizing MFIs are really serving small depositors, and proposes a new indicator for depth of outreach of MFIs' deposit mobilizing instruments.

Two primary arguments can be made for voluntary deposit mobilization among microfinance institutions (MFIs). First, deposit mobilization is an alternative source of funds that was neglected by most MFIs until a few years ago. From this perspective, voluntary deposit mobilization helps MFIs achieve independence from donors and investors, which is particularly important in periods of liquidity constraints. Second, poor households benefit greatly from having access to deposit mechanisms, and the benefits can be even greater than those derived from access to credit. On the funding side, the industry has demonstrated great progress, with savings mobilization now representing more than half of the assets reported by deposit mobilizing MFIs, even though this share seems to have decreased a bit during the last three years.