DESIGNING SAVINGS PRODUCTS
When Bank Rakyat Indonesia decided to offer voluntary savings products, it conducted an extensive study of local demand for financial services and systematically identified potential savers. The bank also looked closely at existing savings services in the informal sector and designed its products to overcome limitations and to replicate the strengths of existing services (box 6.8). For the most part, individual voluntary savings have been found to be more successful than group savings. Most savings products for microclients include the following features (GTZ 1997a): ■ The required minimum opening balances are generally low. ■ A mix of liquid savings products, semiliquid savings products, and time deposits with a fixed-term struc-
Box 6.8 Bank Rakyat Indonesia Savings Instruments AFTER A SERIES OF PILOT PROJECTS THAT BEGAN IN 1984, Bank Rakyat Indonesia introduced four savings instruments with different ratios of liquidity and returns nationwide in 1986. SIMPEDES, a savings instrument that permits an unlimited number of withdrawals, became the “flagship” of the new savings program. The SIMPEDES instrument incorporates lotteries for the depositors that were modeled loosely on Bank Dagang Bali’s highly successful depositor lotteries. SIMPEDES was aimed at households, firms, and organizations that demand liquidity in combination with positive real returns. TABANAS, which provides a higher interest rate than SIMPEDES, was continued, with the withdrawal rules later liberalized. TABANAS was aimed at depositors who wanted middle levels of both liquidity and returns. Deposito Berjangka, a fixed deposit instrument previously available from Bank Rakyat Indonesia only through its branches, was now offered as well through the bank unit in its local banking system. Deposito Berjangka is used by wealthier villagers and firms hoping to realize higher returns and also by those saving for long-term goals, such as building construction, land purchase, and children’s education. Many Deposito Berjangka account holders also hold SIMPEDES accounts. The fourth instrument, Giro, a type of current account, is primarily for use by institutions that must meet special government requirements. With the exception of Giro, these deposit instruments have generally provided positive real interest rates. Source: Robinson 1995.
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ture are offered, including at least one liquid savings product with unlimited withdrawals. ■ Attractive rates of interest are offered. For private MFIs this may mean rates of interest that are higher than market rates as a sort of risk premium to attract deposits, particularly if they are operating in a competitive environment. Public MFIs may be able to pay lower rates of interest based on the perceived safety of public institutions. ■ Interest rates should increase with the size of the savings account to provide a financial incentive for savers to increase deposits and refrain from withdrawing. ■ Conversely, savings account balances below a specified minimum are exempt from interest payments to partially compensate for the relatively higher administrative costs of small accounts. ■ Some MFIs may charge fees and commissions to depositors for opening and closing accounts and for specific services related to account management, such as issuing a passbook. There are three broad deposit groups based on the degree of liquidity: highly liquid current accounts, semiliquid savings accounts, and fixed-term deposits. Liquid Accounts Highly liquid deposits provide the greatest flexibility and liquidity and the lowest returns. Current accounts—or demand deposits—are deposits that allow funds to be deposited and withdrawn at any time. Frequently no interest is paid. Highly liquid accounts are difficult to manage, because they require substantial bookkeeping and are not as stable a source of funding as term deposits. Only a limited portion of demand deposits can be used to provide loans (based on reserve requirements), because the MFI must be able to service withdrawal requests at all times. Semiliquid Accounts Semiliquid accounts provide some liquidity and some returns. Some savings accounts are semiliquid, which means that the borrower can usually withdraw funds a limited number of times per month and deposit funds at any time. Unlike current accounts, savings accounts generally pay a nominal rate of interest, which is sometimes based on the minimum balance in the account over a given period (monthly, yearly). They begin to act like