Reaching the Hard to Reach

Study Overview

People in remote, rural communities around the world still remain largely underserved with financial services. These rural economies are characterized by low levels of cash liquidity, seasonality of incomes, highly segmented markets, and increased covariant risk. In providing services in these areas financial institutions face high transaction costs, low rates of internal capital mobilization due to poor physical infrastructure and a low density population making outreach expensive.

Interested in expanding financial services to remote-rural areas, the Ford Foundation Affinity Group for Development Finance commissioned the Coady International Institute and a global team of researchers to conduct a study on member-owned financial institutions (MOIs).

A key assumption for the study was that member-owned institutions offer distinct advantages for remote rural outreach. Beyond keeping operating costs down member-ownership and member participation are important factors. Member-owned institutions are typically located close to or within the communities they serve and are adapted to the local context and framed by local inputs. In the above context the aim of this study was to identify the potential of MOIs and their support structures to serve remote-rural populations, particularly the poor.

The study involved several facets and spanned three years. First, a literature review was conducted on MOIs that provided primarily credit and savings services in Africa, Asia and Latin America, particularly in markets “unserved” by other financial institutions. Based on the literature review and identified gaps, a framework for the study was organized with two levels of analysis.

At the first level, seven case studies were selected in Africa, Asia and Latin America. Cases were selected to illustrate different types of member-owned institutions that have demonstrated strong outreach in remote-rural populations. The analysis focused on the demand and interests of the most decentralized groups and members.

The second level of analysis focused on how remote outreach was influenced by the three key drivers of outreach: governance; networking and linkages; regulation and supervision. Finally, a synthesis report brought all of the key findings together in one document.

Case Studies

Muntigunung Lembaga Perkreditan Desa, Indonesia: Village ownership as a model for remote outreach of financial services: Case study.

Author: Rewa Misra

English:
Cover [ 2.48 MB ]     Case Study [ 297 KB ]

Bahasa: Click to Open. [ 255 KB ]
French: Click to Open. [ 307 KB ]
Spanish: Click to Open. [ 212 KB ]

Mixtlan Rural Cooperative, Mexico: Does being federated help remote outreach?: Case study. 

Author: Patricia L. Rodriguez

English:
Cover [ 2.48 MB ]     Case Study [ 359 KB ]

French: Click to Open. [ 361 KB ]
Spanish: Click to Open. [ 313 KB ]

Thematic Papers

Regulation and supervision of member-owned institutions in remote rural areas: Thematic paper. 

Author: Renée Chao-Béroff

English:
Cover [ 2.48 MB ]     Thematic paper [ 305 KB ]

French: Click to Open. [ 312 KB ]
Spanish: Click to Open. [ 273 KB ]

Synthesis Paper

Literature Review

Member-owned institutions (MOIs) can achieve impressive outreach. They often serve more rural markets than any other type of financial institution. They typically recover their costs. Through growth or replication, they can serve large numbers of clients. And though often limited in scope, their services may respond to client demand and cost clients less than their alternatives. Frequently, MOIs are plagued by fraud and mismanagement. Their scale and continued existence is limited by their governance.

This study examines what outreach can be expected of different types of MOIs and key controllable factors that affect it. We want to understand how MOIs might be supported to provide ongoing affordable financial services to meet the demand of large numbers of low-income remote-rural members. Therefore, we consider three drivers of outreach:

• Internal governance
• Participation in federations or networks and linkages to private suppliers, NGOs and government
• Regulation and supervision

Our analysis is based on a review of the literature on MOIs and focuses on MOIs that provide primarily credit and savings services in Africa, Asia and Latin America. We are particularly interested in MOIs that serve markets unserved by other financial institutions.

Financial Services in Remote Rural Areas: Findings from seven member-owned institutions: A literature review
Authors: Madeline Hirschland, with Renée Chao-Béroff, Malcolm Harper and Nanci Lee.
English:
Cover [ 2.48 MB ]     Literature Review [ 694 KB ]

This study involved several facets and spanned three years. A literature review was conducted on Member-Owned Financial Institutions (MOIs) that provided primarily credit and savings services in Africa, Asia and Latin America, particularly in markets “unserved” by other financial institutions. Based on the literature review and identified gaps, a framework for the study was organized with two levels of analysis.

Key Findings from the Literature Review

The review found that MOIs can achieve impressive outreach. They often serve more rural markets than any other type of financial institution and typically recover their costs. Through growth or replication, they can serve large numbers of clients. And, though often limited in scope, their services may respond to client demand and cost clients less than their alternatives.

Based on the literature review, three key drivers of outreach were identified for further analysis:

• internal governance;
• networking and linkages;
• regulation and supervision

Summary Document and Guide

Complete Study

Focus Notes

Regulation and supervision of member-owned institutions in remote rural areas

Author: Renée Chao-Béroff

Focus Note [ 183 KB ]