Bo’s millionaire maids, rural banks and the innovation question
Q: We are a group of business friends who own rural banks in northern Luzon. We heard you (the Senior MRx-er) speak at our RBAP-MABS conference two years ago. (RBAP is Rural Bank Association of the Philippines. MABS is a USAID-supported Microenterprise Access to Banking Services program.) We liked reading your column especially when you wrote about how the banking sector has been a largely unrecognized source of life-changing innovations like the ATM, the credit card, etc.
But these are innovations from large universal commercial banks. What about us who are only rural banks? How can we innovate? Where do we source ideas for innovating?
A: If we go back to that RBAP-MABS Conference, you were already talking about an innovative service that you rural bankers could provide your micro-enterprise clients including their families. That was the micro-insurance service!
It was an American speaker whom USAID invited to introduce and mentor RBAP members who were ready to adopt micro-insurance as part of their banks’ service lines. We know that it’s an “imported” innovation. Your question is asking for one that your own rural banks can do or search for.
Best source of innovation
We’re certain you know many ways and places for sourcing. However, the simplest yet most fertile and cost-effective source is the same, whether it’s an imported or domestic innovation: it’s from your target clients themselves—those micro-entrepreneurs and their families. It’s from these target clients’ “unmet needs,” “unserved needs,” and “underserved needs” where you can find those simplest yet most fertile and most cost-effective sources for innovating ideas.
Let’s pursue this answer. Ask yourself: “In addition to the many usual purposes for the savings deposits they have with us, what unserved or underserved needs do these micro-entrepreneurs and their families have for placing their money in our savings deposits?” That unserved or underserved need is no other than earning much more than the interest earnings of their money in even time deposit.
Maids who want to be millionaires
Those micro-entrepreneurs and their wives who belong to the borderline poor socio-eco class and have read Bro. Bo Sanchez’ Abundance Formula book would like to earn as much as 20 percent on investing their bank savings in equity funds of a mutual fund company.
In his best-selling book, My Maid Invests in the Stock Market, Bro. Bo said that at first, his maids were scared to put their money in the stock market. That’s because they felt safer in the bank. But Bro. Bo showed them that putting their money in the bank was also risky. That’s because “their money would shrink over time and therefore lose value.” At an annual 20 percent growth of P3,000 a month invested in equity funds, after 20 years when a maid retires, Bro. Bo’s maid saw that she would be as rich as P37 million. And so the maids invested under Bro. Bo’s guidance and did very well and became “the most famous maids in the world.”
For your rural banks, where is the innovating lead here? That’s in the unserved or underserved need that Bro. Bo Sanchez is trying to fill with his advice to his maids to invest their bank savings or a good part of it. Your rural banks have micro-entrepreneur depositors and wives who yearn for earning more from their savings deposits.
What most of them don’t know yet is how Bro. Bo’s maids’ savings could “earn as much as 20 percent a year.” They don’t know their savings can earn this by investing those saving in equity funds of a mutual fund company.” Your rural banks can explain to them and if you provide the micro-investment desk for this purpose, you can capture them or most of them as your micro-investor clients.
So here’s from where your innovation service can come. Why not offer to your micro-entrepreneur savings depositors and to their families this investment service? We realize that right now you have a minimum amount per depositor for investment. Maybe that’s P15,000 or P50,000. But you know that a micro-entrepreneur and his family won’t have the enough amount to qualify. So why not lower that minimum required balance to the amount they can afford like P500 or P1,500?
Like your micro-insurance service, this is micro-investing. As to the other details required to make this happen, those are well within the collective creativity of your fellow rural bankers to tackle. Of course, you need to assess both negative and positive sides of this innovation. What’s working against it and what’s working for it?
On the negative side, you can be sure that there will be some rural bankers who will see this project more of a threat than an opportunity. They will feel that when their depositors shift part or all of their savings into investments, this will lead to a loss of their savings base, and therefore their profitability.
Balance the foregoing against what’s working for this project or its positive side. Just think of what this will do for wealth building for this large, very large population of our society’s borderline and middle poor? That wealth building will happen to your savings depositors who will do their investing through your rural banks.
Of course, there will be those who will want to do their own investing by themselves or through other than rural banks. But if they learn about investing from you, most will be so grateful, they will do investing through you.
This possibility is a process and service innovation that will empower rural banks and any other banks including the large commercial banks and even the Central Bank to significantly contribute to the UN’s No. 1 Millennium Development Goal of “Making Poverty History.” Just imagine what this will do to your corporate social responsibility reputation and brand equity.
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