Ageless Microfinance: Four Myths

>> Authored by Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion

Aging is an important dimension of global change—and rapid population aging is not just a problem that wealthy countries face. Within just 15 years, there will be 1.3 billion people over age 60 in the world, constituting 13 percent of the global population. Over 60 percent of these people will live in low and middle income countries. In fact, even by 2020 the number of people over the age of 65 will have surpassed the number of people under the age of 5.

CFI and HelpAge International have been conducting research on the growing challenges and opportunities of older people and financial inclusion. We’ve found that microfinance can play a unique role in addressing some of the challenges associated with aging. However, there are a handful of myths that keep microfinance institutions from working with older clients.

Myth #1: Older people don’t have income.

The idea that older people do not have—or cannot earn—an income comes in part from a view of work as ending with a defined retirement. In reality, we see older people continuing to work as long as they have the ability. In a survey of people ages 50-80 in Thailand, researchers found that the percent of people who reported having worked in the past week steadily declined instead of sharply dropping off. Even at age 69, almost 50 percent of the survey sample continued to work.[1]

Nevertheless, many microfinance institutions continue to apply age caps on credit. A survey administered by CFI found that the gap between microfinance institutions’ self-reported age caps and national life expectancy was, on average, 15 years. For women, who live longer than men, this credit gap is even higher. Microfinance institutions have the ability to address this inequality and raise or eliminate age caps, allowing those older people who continue to work the productive capital they need to grow their businesses.

Myth #2: Older people cannot use technology.

Technology is changing the ways that people access and use financial services, and lower the cost to providers. Technology is not only changing the financial services landscape for younger people, it is also providing older people with a more user-friendly platform  to access services. Barclay’s Bank in the UK is experimenting with more accessible ATMs that provide audio for visually impaired users. HelpAge International is giving older people phones with larger keyboards to increase ease of use. Smartphone technology opens these possibilities and more, making banking using technology easier for older people. Rather than technology being a barrier for older people, microfinance institutions can think of the possibilities that technology opens up for accessibility.

Myth #3: Poor people don’t think about long-term saving.

People who are poor may not have a high income, but they still save for the long-term or for their older years. The Financial Diaries project reminded us that people at all income levels save—for both short and long-term events.[2] A recent study of financial capability in Colombia revealed that even though people over age 60 were relying on support from family and friends and government pensions as their primary means of covering their expenses, people under age 60 asserted that to cover they were going to be able to save for their older years through their own saving and financial asset-building.[3]

Not only do people at all income levels save, but they save for older age. The Grameen Pension Savings (GPS) product is one example of this. GPS is a long-term savings product with a high interest rate that builds on regular contributions. Grameen has found that the product is especially popular among clients who receive remittances. While not a proper pension in that it does not mature when a customer is older, many customers choose to “roll over” the product so that it can continue to mature.

Myth #4: Pensions are a government problem, not a microfinance problem.

Pensions are everyone’s problem, and not all pension products are government-led. Microfinance institutions in India have found great success when partnering with Invest India Micro Pension Services (IIMPS), an organization that works alongside microfinance institutions to offer a channel people can use to contribute to their government-held pensions. IIMPS offers education to microfinance clients about their long-term financial health, providing financial counseling to clients of microfinance. While the average length of engagement a microfinance institution may have with its customers is three to five  years, the pension fund, managed by the government, continues the relationship with the customer so that they receive regular updates on how the fund is growing over time. Microfinance institutions can creatively partner with governments to address the problem of a lack of access to a safe place to store long-term funds.

The microfinance industry has an opportunity to play an important role in addressing the problem of age and financial inclusion, recognizing and taking advantage of the facts that older people continue to be economically active, that technology can play an enabling role, and that microfinance institutions have the ability to empower working-age customers to prepare for older life. This “Month of Microfinance,” consider how microfinance can empower people at all stages in their life.


For more, read CFI and HelpAge International’s report Aging and Financial Inclusion: An Opportunity.

Photo credit John Rae for Accion.

[1] John E. Knodel, Vipan Prachuabmoh, and Napaporn Chayovan, “The Changing Well-being of Thai Elderly: An Update from the 2011 Survey of Older Persons in Thailand.” PSC Research Report No. 13–793 (2013).


[3] Rekha Reddy, Miriam Bruhn, and Congyan Tan, Financial Capability in Colombia: Results From a National Survey on Financial Behaviors, Attitudes, and Knowledge (Washington, DC: World Bank, 2013).



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