Microfinance and Small Deposit Mobilization: Fact or Fiction?

MIX Data Brief No. 2

20 Pages Posted: 17 Jul 2009 Last revised: 5 Oct 2009

See all articles by Adrian Gonzalez

Adrian Gonzalez

World Bank Group

Richard L. Meyer

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Date Written: June 2009

Abstract

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, the ratio of Average Deposits per Depositor to Average Loan Balances per Borrower. We argue that smaller average deposits per depositor are associated with greater depth of outreach of the retail deposit products of MFIs, in the same way that the industry has argued that MFIs with smaller average loan balances per borrower have greater depth of outreach of their credit products. The implicit assumption in both cases is that larger accounts are positively correlated with the income level of the clients. Therefore, MFIs with smaller average deposits per depositor will be deemed as better than those with larger average balances, ceteris paribus. By this criterion, it is easy to rank deposit mobilizing MFIs in the same country because average deposits per depositor are comparable. However, the comparison of depth of savings outreach for MFIs in different countries is not as straight forward because of differences in per capita income. Therefore, the proposed use of the ratio of Average Deposits per Depositor to Average Loan per Borrower as a new indicator of the depth of outreach of MFIs deposit mobilizing instruments is especially useful for international comparisons.

In order to test the new indicator we used data from the Microfinance Information Exchange, Inc. (MIX). The following discussion is based mostly on country averages, but the results based on country medians produce similar results. Loan amounts per borrower and deposit amounts per depositor are both presented as a percentage of GNI per capita in order to introduce some comparability across countries and regions. MFIs are divided into deposit mobilizing MFIs and non mobilizing MFIs, and country average size loans per borrower are calculated for each group. Most of the data is from 2007, but in a few cases 2006 and 2008 data were used. For the country analysis, only those countries with at least two deposit mobilizing and two non-mobilizing MFIs were included. This restricted the total sample size to 38 countries and 298 deposit mobilizing MFIs. One hundred and four MFIs(64 percent) were eliminated, but resulted in excluding only 30 percent of the deposit mobilizing MFIs in the total database with data for the years 2006-2008.Considering the relatively small sample size for some countries, the observed differences between means were tested for statistical significance using t tests.

Keywords: Microfinance, microsavings, small deposits, deposit mobilization, savings, depth of outreach, access to financial servicies

JEL Classification: microfinance, financial intermediation, microdeposits

Suggested Citation

Gonzalez, Adrian and Meyer, Richard L., Microfinance and Small Deposit Mobilization: Fact or Fiction? (June 2009). MIX Data Brief No. 2, Available at SSRN: https://ssrn.com/abstract=1435471 or http://dx.doi.org/10.2139/ssrn.1435471

Adrian Gonzalez (Contact Author)

World Bank Group ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

HOME PAGE: http://www.doingbusiness.org

Richard L. Meyer

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

Rural Finance Program
Columbus, OH 43210-1067
United States
614-247-6357 (Phone)
614-292-7362 (Fax)

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