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Central banks often cite the protection of poor people's savings as a reason for regulating MFIs, and prohibiting semi- and informal deposit-takers. Informal savings mechanisms often prove more risky than unregulated MFIs, however. This article describes research demonstrating that poor people lose as much, and usually more, of their savings in informal savings mechanisms, such as ROSCAs, ASCAs, savings in kind, and especially saving at home. Even formal savings institutions were found not to be completely safe. Prohibiting MFIs from accepting savings is likely to drive poor people to riskier informal alternatives, and is therefore undesirable. It is clear that when discussing the risks to poor people's savings, this has to be evaluated on a relative basis. Very often all the alternative savings systems available to poor people are risky... thus poor people are left facing decisions on the relative risk (or relative safety) of the various semi- and informal savings systems open to them. It would be better...

South Africa has an active informal insurance industry that profitably sells insurance to low-income consumers (microinsurance). This article is based on a case study of the informal funeral insurance industry in a rural township in South Africa. The study revealed that poor people often cover the very considerable funeral expenses from a number of sources, including informal credit, informal insurance, and friendly societies. The practices of informal township funeral insurers are contrasted with those of formal insurers. The products of informal insurers were much more popular among respondents than those of formal funeral insurers, because the products fitted the socio-economic contours of their clients' lives. A series of lessons can be drawn from the practices of informal insurers for the development of new microinsurance or the improvement of existing microinsurance products.

The term ‘microfinance institutions’ covers a broad spectrum from traditional businesses, for whom social objectives are only a by-product, to traditional social service organizations, for whom reaching the poorest is the prime objective. In between are social enterprises, which are explicitly aiming at reaching very poor people (however defined) but at the same time are aiming at sustainability. This article takes the case of Freedom from Hunger’s Bolivian counterpart, CRECER, and shows how although CRECER is making substantial progresss, its success in meeting both these objectives depends on how they are defined. For example, what proportion of better-off women are allowed among the target group of poor women? And should ‘sustainability’ include, as well as meeting operational and financial costs, repaying the original donor for their start-up investment? It is argued that most social enterprise MFIs cannot and should not attempt to do this but should aim to provide good-value services for poor people ...

Unlike the previous two eras, when financial services for the poor were clearly characterized by first agricultural loans, then microloans to business women, the new microfinancial services era promises a diversity of financial products, and with it confusion about how these products will benefit the poor. This article attempts to clarify the situation by defining all financial services for poor people as means of turning their savings into usefully large lump sums—sums that are then used to meet needs arising from life-cycle events and from emergencies, and from opportunities to invest in land, in productive and household assets, and in businesses. Savings can be turned into usefully large lump sums by means of three basic patterns: ‘saving up’, ‘saving down’ and ‘saving through’ and the various informal financial services employing these devices which are used by poor people worldwide are described. Good financial services for poor people are therefore ones that make it convenient to store the savings a...

Are all entrepreneurs poor? Do all entrepreneurs see a lack of credit as their main constraint? Is poverty reduction the main objective of all microfinance institutions? Does lending methodology affect outreach? Can financially sustainable microfinance institutions (MFIs) reach the poorest of the poor? Do MFIs only reach petty traders? Do MFIs reach poor and remote areas? This article is structured around a discussion of common beliefs and assumptions regarding poor people and microfinance programmes. It reveals that many microentrepreneurs in Latin America are not poor, and many microfinance institutions lend mainly to non-poor clients. The microfinance industry consists of various market niches, with different services and varied objectives, and this diversity is necessary for achieving poverty reduction overall.

In Bangladesh, a poorly performing formal financial sector runs parallel to a burgeoning and innovative microcredit industry run by NGOs. The success of the group-based microcredit formula originating with Grameen Bank is well-known; the expansion of Bangladesh's microcredit industry is also partly the result of the supervisory system created by the apex organization, PKSF. As concern increases about how to cater for the financial needs of the poorest, who are unable to benefit from microcredit, attention is focused on savings accounts to provide poor people with security. This article proposes the establishment of a savings guarantee foundation in Bangladesh which would have the function of regulating savings accounts with NGOs, guaranteeing people's savings with certified NGOs, and researching appropriate savings and insurance products for poor people.

There is a change going on in the way microenterprises are viewed. No longer are they the means by which poor people scrape a living; they can also be an integral part of the economy, providing jobs and contributing to economic growth. As such, there is a potential for them becoming valuable clients of the financial institutions who choose to specialize in microenterprise servicing. This article describes the variety of ways in which banks and NGOs are attempting to provide sustainable financial services as well as business support to the microenterprise sector in Latin America. It also examines how regional banks, such as the Inter-American Development Bank (IDB) can support and encourage new initiatives by banks and NGOs, as well as reforms to the banking regulations, which will ultimately benefit the development of microenterprises.

A sub-sectoral approach to enterprise development has the capacity to identify particular factors limiting the incomes of poor producers in the manufacturing chain of a particular item. In dealing with such bottlenecks it is sometimes possible to have a much wider impact upon poor people's incomes than other approaches to poverty alleviation, which may be limited to a geographical area. A further advantage of the sub-sectoral approach is that rapidly growing sub-sectors may be identified and poor producers enabled to take over more profitable elements of the manufacturing chain, so as to benefit from the growth. This article describes the work of PRADAN in north India, and gives case studies of how a sub-sectoral analysis of production has enabled disadvantaged groups to increase their skills or change their working patterns and to sell higher-value produce, thereby earning a better income.

Microenterprise programmes can be excellent vehicles to foster savings among poor populations, with considerable benefits both for those saving and for the programmes themselves. The purpose of this article is to explore issues related to savings mobilization from the vantage point of projects that seek to reach poor people who are self-employed in productive activities. Microenterprise development projects in particular are the focus of this study.The first section provides background for the discussion, asking why people save, and what sort of savings schemes prevail among poor populations. The second section turns to examples of savings mobilization in microenterprise programmes to identify the factors that contribute to success.Finally, the article identifies the circumstances under which mobilizing savings makes economic sense, and provides some approaches for future microenterprise lending programmes.