|Where Does Saving Fit into Micro-finance Systems? (GRET)|
Vietnam and Cambodia have emerged economically weakened from a long period of collectivism. Families are rebuilding their capital, quite quickly in some cases, with more difficulty in others.
In these conditions, the first priority of rural financial systems should be to help families to rebuild their capital. Access to capital is in fact a key factor in the accrual curve. This is even more the case in Cambodia and in Vietnam where the performance rates achieved thanks to small investments are high.
In this context, a policy of credit preceding savings is justified. The important thing is for family capital to be allocated to a viable investment. As this is already the case, it is less important that the financial systems are still not playing their role of intervention to any great extent. It would even in a certain respect be anti-conomic to mobilize compulsory savings as this would amount to "freezing'' a proportion of family capital which could be put to better use in production or trade.
The efficiency of a M-F system cannot thus be measured by the volume of savings that it mobilizes, but by the profit it helps to create in durable and equitable conditions.
And yet, at the same time the sustainability of the financial systems set up must be envisaged. With a view to their financial autonomy, it is desirable for M-F systems to diversify their resources and not to depend on external financing alone. From an economic policy point of view, refusing excessive debt should logically be accompanied by political incitement for internal saving. National polices are already reflecting this intent, particularly in Laos where the savings rates are higher than credit rates, and in Vietnam, where the central bank has sought to lead the way. M-F systems will be asked to support this policy.
We should therefore already be pursuing, using a strategy of gradual inducement to save and the generation of M-F systems' own funds, a gradual rebalancing of the resource in favor of internal resources.
The strategy for mobilizing savings should be based on a few simple basic principles, in line with the analyses elaborated above:
- It should give priority to voluntary savings. In the final resort the challenge for M-F systems is to tap savings which are not being reinvested in the short and the medium term - notably those which are hoarded in gold. These "medium and long" savings, held essentially by middle-income and well-off families, do not finance immediate investments. M-F systems can therefore try to tap them. This presupposes that they are converted into the national currency (they are still held in gold in Cambodia) and that the potential depositors have greater confidence in the economy and in the savings-credit scheme.
- One of the key factors in mobilizing voluntary savings being confidence, time must be allowed to pass and to play its part. After four or five years of operation, the credit schemes may perhaps inspire sufficient confidence to attract savings, in a monetary context which is otherwise becoming more stable. There is only one way to find out: experimentation.
- Starting out from the principle that mobilizing their own resources is one of the unavoidable criteria of credibility of micro-finance institutions (vis a vis economic authorities and financial institutions capable of refinancing the M-F system ), a limited collection of compulsory savings can be envisaged if mobilizing voluntary savings proves difficult. Compulsory savings should, however, be restricted to 5% of the amounts borrowed. The objective is after all to begin to mobilize resources, to get clients used to the practice of monetary savings in their financial system, whilst at the same time avoiding making too many "dents" in their capital. Real positive rates must also be applied to these savings.
- Finally, the policy on rates of interest should be sufficiently flexible to enable M-F systems to generate their own funds ( rates must therefore be high). This is applies all the more, the more difficult it is to mobilize savings.
Within the network supported by Gret in Cambodia, an experiment
is beginning. This is aimed initially at voluntary savings. In Vietnam,
discussions with the Bank for the Poor and VBA are taking place in order to
explore the various possibilities (voluntary savings, compulsory savings,
membership fees, etc.) which will be tried out in the province of Vinh Phu.
Monitoring and evaluation will enable our analysis to be refined and techniques
to be gradually adapted in the light of the results.