Shohoz Shonchoy's Product 9: Discussion
P9 is designed to appeal to poor households (not just traders as is the case with P7) who want to save, but find it difficult.
It
hypothesizes that the difficulties arise from the household`s recurrent
shortage of cash, which lead to most attempts at saving being abandoned
before a usefully large lump sum has been achieved. It answers this
difficulty by providing a ready source of cash through interest-free
loans which may be topped-up at any time. But one third of the value of
each loan (or top-up) is placed directly into a savings acccount. The
savings acccount can be accessed at any time (though the withdrawal
must first be used to pay down any outstanding loan balance) but savers
suffer a penalty unless their savings have reached 20,000 taka ($285),
a sum seen as `usefully large` by the target group of clients.
P9`s business plan is unlike that of other SafeSave
or Shohoz Shonchoy products. Loans are interest-free, so income arises
from some modest fees and from earnings on the savings portfolio,
which, it is hoped, will exceed the loan portfolio early on the life of
the product. Risk is expected to be very low because most clients will
hold bigger savings than loan balances. Costs are also low since
field-level daily collection is done only for loan repayments - all
saving is done by deduction from loans and top-ups disbursed at the
office.
In the light of constant press criticism of MFI loan
interest rates in Bangaldesh, and in the country`s Islamic context,
offering interest-free loans is an attractive idea to both the provider and the client. |
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