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New FAO video on protecting the savings of rural depositors

The video 'Safeguarding deposits: protecting savers' is available in English or French. For more information contact: Pekka.Hussi@fao.org. The publication can be ordered from the FAO Sales and Marketing Group, Information Division: 'Safeguarding deposits: Learning from experience' 1995, 181 pp. ISBN 925103625X US$16.00

Saving is a fundamental human activity. The savings of individuals and households are also essential to a country's economic growth. To a large extent, savings determine the rate at which productive capacity and income grow. The vital importance of not only encouraging savings but also of protecting deposits, specifically in the rural communities of developing countries, is the message of a new video from FAO, 'Safeguarding deposits: protecting savers'.

The 15-minute video takes a look at the problems facing small banks and individual depositors in rural communities. It outlines measures to ensure the safety of deposits, including proper institutional structures, sound management and investment, and external supervision.

In rural areas, people traditionally have been reluctant to put their extra money in banks. Some prefer to invest it in livestock. Others hide their cash in vulnerable places such as in jars or under mattresses, or, worse, carry it in their pockets. Banks, many inconveniently located in distant cities, have inspired little trust in rural investors, who consider them cold, unfamiliar and primarily "for city folk".

Yet the untapped potential of rural savings could provide a tremendous boost to local economies in developing countries. A large percentage of the developing world's population lives in rural areas. Savings mobilized by efficient and well-managed local financial institutions could finance increased levels of development investment in rural areas. Women, who produce most of the developing world's food, are particularly important clients for banks in rural areas.

'Safeguarding deposits' outlines the general principles of the safety of deposits, describes the problems unique to rural banking and offers inspiring case-studies of successful small banks in rural communities:

• In a remote area of Tanzania, villagers decided to open their own local bank instead of keeping their money at home. The depositors at the Marangu West Savings and Credit Co-operative are not only the bank's customers, but also its owners and managers. Membership has grown from an initial group of 60 to nearly 2 000.
  
• In Madagascar, an ambitious bank in the busy coastal town of Toamasina targets a local market by offering a unique customer service: It employs one of the stall owners to collect vendors' deposits right in the market, saving them a trip to the bank. The service instills trust in the system through careful record keeping.

Many rural people are unaware of how banks use their money, so trust is important. Successful small rural banks inspire depositors' trust by observing the same rules as larger banks in urban areas. Transparent teller windows, for example, allow depositors to observe transactions. Access to adequate technology is also important. A banking software developed and distributed by FAO has helped many small rural banks to maintain accurate records. With the software, managers and tellers feel more confident, a feeling which they in turn communicate to customers.

These issues and other different aspects of the safety of deposits are explored in depth in the publication 'Safeguarding deposits: Learning from experience', which prompted the production of the video.

4 February 2000

Related links

• The Rural Finance Group, Marketing and Rural Finance Service (AGSM)
• FAO Agriculture Department
• News & Highlights archive