Just two months ago I started writing a PhD. My topic is – surprise – microfinance, but more specifically, microsavings, i.e. the provision of savings services to poorer populations. The Economist recentely wrote on this topic, so apparently, someone else than me is interested. That’s great. The Economist agrees with me that microsavings is overlooked, that it’s important and that it will grow in the future. Even greater. The newspaper writes that “the industry remains dominated by credit”. I’m not too sure about that. At least it depends on who you ask. In 2004, CGAP looked at the world’s MFI’s and found that the world’s poor had just above 100m savings accounts but only around 50m active loans. There are quite some uncertainties in this data and it’s old too. Indeed, there are signs that there is a great demand for savings services (see the box on this page), but not much research seems to have been done on microsavings – at least not compared to the vast amount of research on microcredit. For example, nobody seems to have answered simple questions like why people are savings and what the effect is. Hopefully, I can contribute here just a little bit. Comments and suggestions are more than welcome.
Here I wish to engage in an ongoing debate on defining microfinance. Particpate, anyone who wish! It is easier to follow the discussion if we number our different definitions.
My initial definition is this
(1) Microfinance is financial services targeted towards poor people. Microfinance can be subsidized or unsubsidized.
The advatages of this definition is that it is broad, but at the same time distinguishes microfinance from ordinary financial services.