Letters to the editor

Ms Fillmore is to be congratulated on her enthusiasm for microcredit, but I am left wondering about the evidence for her article (“Not all microfinance is the same”, Quarterly Access, Vol 3, Issue 3). Given her knowledge of the Grameen Bank, I do not understand her comment that “.... the concept of matched savings has not yet been widely introduced in developing nations as part of micorfinance systems”. 

Even if not precisely within Ms Fillmore’s definition of “matched”, savings play a vital role in the Grameen credit system. They facilitate asset formation and serve as a rescue mechanism for members when they encounter adverse conditions. They also serve as a source of additional working capital. Finding a safe place to save is not easy for the rural poor.  For that reason, it is important to provide a savings service beyond loans for income-generating activities. 

Grameen Bank offers a number of savings products with very attractive interest rates for its members as well as the general public. Grameen mobilises local deposits and has been able to finance 100% of its outstanding loans from deposits. More than 57% of its deposits come from its own borrowers. 

The Personal Savings Account begins with the small fund started during the borrower’s training. Thereafter, in every weekly centre meeting, a member will deposit weekly compulsory savings. The amount varies according to the size of the loan. The Personal Savings Account allows withdrawals at any time, as needed by the member. 

In the cash-strapped developing world, it may also be unwise to rely on government health providers offering “matched savings to expectant mothers who enrol in health classes”.  Again, an off-shoot of the Grameen Bank - Grameen Kalyan - may be relevant to this issue. 

Grameen Kalyan’s (GK) primary objective is to provide cost-effective welfare and healthcare services to the borrowers and employees of the Grameen Bank. GK welfare programs provide scholarships, higher education loans for borrowers and medical loans for employees and their family members.   Since its inception, GK has introduced affordable pre-paid health care delivery services schemes termed as micro-health insurance schemes. 

Some further evidence to enhance Ms Fillmore’s valuable awareness of the positive value of microfinance. It’s a hand-up - not a hand-out. 

Peter Graves

Great to read the article on one of the most successful tools to fight poverty - microfinance. (“Not all microfinance is the same”, Quarterly Access, Vol 3, Issue 3).

Access to microfinance has been growing over the past 3 decades, and, today, more than 100 million of the poorest families globally benefit from such financial services. In the developing world, 2.7 billion adults (about three quarters of the adult population) don’t yet have access to any financial services due to their poverty, illiteracy, gender or because they live in a remote region.

The Australian Government currently contributes about $20 million to microfinance initiatives each year, and on 10 March 2010 the Australian Government released its long awaited strategy document, “Financial services for the poor – a strategy for the Australian aid program 2010–2015”. This is a milestone in the Government’s recognition of the role of microfinance and financial inclusion in achieving the Millennium Development Goals.

Saving is an important aspect of money management. However, the poorest of the poor, though credit-worthy, may not initially have the capacity to save as well as repay a small loan. The income generated from initial loans may be too small to allow saving, until a subsequently larger loan and a more established small business that generates more income. Matched savings programs would also certainly encourage borrowers to save.

Hope to hear more about microfinance for the poorest - a basic right for all people on the planet.

Sue Packham

Back to Quarterly Access Summer 2012 (Vol4 Issue1)

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