Last week I had the pleasure to visit SafeSave, an unconventional microfinance institution operating in Dhaka, Bangladesh. SafeSave was founded by Stuart Rutherford (among other things, author of The Poor and Their Money and co-author of Portfolios of the Poor) and puts a very interesting twist on the traditional model of credit-led microfinance institutions. (To see Stuart Rutherford discussing SafeSave, see Video IV, at the 5:30 mark.)
SafeSave provides financial services to very poor clients without relying on group meetings, joint liability, guarantors, or even fixed weekly loan repayments. It was set up as an experiment, to learn whether a flexible, non-group lending methodology would be sustainable. In practice, a lot of the common microfinance wisdom is challenged, and it works: the repayment rate, for example, stands at 95 percent. This is just one statistic. More importantly, I think SafeSave's methodology is a great way of serving clients with a flexible and convenient system that matches their needs in a unique way.
.JPG "Picture 1. SafeSave collector recording a client's saving deposit (money in her hand)")
At the heart of SafeSave's methodology are the 66 collectors, who visit clients at their homes or workplaces every day and provide them with an opportunity to make savings deposits or withdrawals, and repay their loans (clients need to go to the branch for loan disbursement and large savings withdrawals). All collectors are women who come from the same neighborhoods that SafeSave serves. To match clients' irregular income flows, savings and loan repayments are optional, and clients choose how much they want to save or repay on a given day. Loans therefore do not have a definite term. The collectors record all transactions on smartphones, to help in the accounting.
SafeSave collects savings and extends loans. Savings earn clients six percent interest per year, and interests on loans cost three percent per month. Quick repayment of loans is encouraged by conditioning the increase in the clients' credit limit by how fast they repay their existing loan. The other product is a long-term savings product. Savers receive higher interest rates by agreeing to not withdraw their money for three, five, seven or ten years.
In the country where Grameen Bank, BRAC, and ASA tower over the microfinance landscape with millions of clients each, SafeSave definitely appears
