Figure 6.1 The Range of Financial Service Providers Community-based providers
Individuals Moneylenders Deposit collectors Pawnbrokers Traders Shop owners Friends, Family
Institutional providers
Community-based groups Indigenous groups: ROSCAs, ASCAs Burial societies Facilitated groups: CVECAs Savings groups Self-help groups Financial service associations
Registered institutions Financial cooperatives SACCOs Suppliers, buyers NGO MFIs Mutual insurers Money transfer companies Mobile network operatorsa
Regulated institutions Deposit-taking MFIs Savings and postal banks State banks Commercial microfinance banks Non-bank financial institutions Commercial insurers
Level of formalization
Note: ROSCAs = rotating savings and credit associations; ASCAs = accumulating savings and credit associations; CVECAs = caisses villageoises d’épargne et de crédit autogérées; SACCOs = savings and credit cooperatives. a. Mobile network operators are regulated as communication companies; most are not licensed to provide financial services.
lack of discipline, or collective shocks—for example, a natural disaster or a bad harvest (Robinson 2001). Borrowing from family and friends can also be associated with stigma or loss of dignity, especially if borrowers become dependent on others or over-indebted (Ruthven 2002). Informal or community-based financial service providers can be divided into two broad categories: indigenous and facilitated. Indigenous providers, both individuals and groups, emerge within communities with no external input or training. Individual providers such as moneylenders generally offer basic credit services using their own capital. As local residents, they offer convenience and a rapid response. Indigenous groups are different; their most common goal is to combine small sums into bigger ones, the purpose of which varies with the type of group. A rotating savings and credit association (ROSCA) pools money to circulate among the members in turn, while a mutual aid society pools member contributions to have funds available to respond to unexpected or emergency expenses (often a specific 150
type of expense, such as a funeral). Group members determine the rules that govern the group. Facilitated providers are groups (not individuals) that receive external training or assistance, typically provided by nongovernmental organizations (NGOs) or government, to develop and implement a process for saving and lending. Many forms of facilitated groups have been introduced over the years, but perhaps the largest, most wellknown are India’s Self-Help Groups (SHGs). Most facilitated groups follow a set of procedures designed to help them to save regularly, pool their savings, and make loans. Some operate solely within their community; others federate, borrow from banks to on-lend to their members, and take on other development activities in addition to financial services. Despite their diversity, facilitated groups serve people who typically may not have access to other financial services. They have a relationship with an external facilitator (often time-bound) that introduces an approach or model with procedures and systems to guide their financial activities.
The New Microfinance Handbook