The relative risks to the savings of poor people
by Graham Wright and Leonard Mutesasira
Jul 16, 2018
1 min
In view of the highly risky nature of saving in the informal sector, it is probably necessary to think more about helping clients understand the relative risk of saving in these semi-formal institutions. It should also be noted that the evidence from this study suggests that poor people do value some form of external accountability.
Clearly, this type of external accountability increases the trust of poor people in the institution and thus facilitates the institution’s savings mobilization activities. Thus serious semi-formal sector MFIs should want some form of external accountability.
It is important to improve internal supervision (accounting systems, internal control, governance, adequate transparency to allow members to make their own decisions about the risk associated with saving in the institution etc.). At the same time, the microfinance industry has to search for alternative and appropriate approaches to external supervision, probably a voluntary system based on decentralized, nongovernmental bodies.
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