Reaching the Hard to Reach
Comparative Study of Member-Owned Financial Institutions in Remote Rural Areas
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.