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Practical Issues in Local Saving Mobilization by MFIs Image

Promoting Inclusive Markets and Financial Systems

Practical Issues in Local Saving Mobilization by MFIs

Practical Issues in Local Saving Mobilization by MFIs

Summary

This paper summarizes findings of research conducted to understand limitations to savings mobilization in Ethiopia. The paper claims that although financial outreach has deepened in the country since 1996, a number of gaps remain. It further suggests the appropriateness of financial products and services, staff attitude and behavior of providers need to be tailored to meet target market requirements in order to increase outreach. Key findings concerning Ethiopian MFIs include:

  • Product development is not supported by detailed market research;
  • Voluntary saving is effectively promoted only to borrowers and not to net savers;
  • Telling a potential client once about the benefits of saving with an MFI is not enough;
  • Institutions should demonstrate their competitive advantage in relation to other informal and formal savings mechanisms;
  • Most MFIs have no real strategy for linking with informal financial mechanisms like Iddir, SHGs, etc.;
  • Managers must help their employees understand why savings mobilization is as important to their job and to their institution as credit;
  • Saving targets are often set in the traditional top-down fashion, sometimes not endorsed by branch and front line staff.


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