Why village banking? |
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Throughout most of the world, working capital -- the money needed to start or expand a business --
is simply not available to the poor. Commercial banks will not make loans without collateral and
credit ratings. Village banking assumes that, given access to credit, poor people can create their
own businesses, repay their debts, set aside savings for the future, and work diligently to bring
themselves out of poverty.
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What is a village bank?
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Village banks are community-based credit and savings associations. They typically consist of 25 to
50 low-income women who are seeking to improve their lives through self-employment activities.
Although FINCA provides the initial loan capital for the village bank, the members themselves run
the bank: they choose their members, elect their own officers, establish their own by-laws, distrib-
ute loans to individuals, collect payments and savings. Their loans are backed, not by goods or
property, but by moral collateral: the promise that the group stands behind each individual loan.
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How does it work?
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Village banks grant loans for four-month cycles. The loans are then repaid in weekly installments
of capital, interest, and savings. After the first cycle, loan amounts are based on savings; the more
a member saves, the more she may borrow. By emphasizing savings, village banking promotes
financial independence; over three years, or nine loan cycles, the typical village banker will accu-
mulate $300 in savings, a target that ensures her continuing self-sufficiency.
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Who are the members?
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The typical village bank member is a woman between 25 and 44 years old, supporting, or helping
to support, three children. She has little hope of being hired by a business outside the home, and
she may be unable to look for outside work because she has small children or a sick family
member to care for. Her dream is to start her own small business, either in her home or close by,
that would allow her to earn the income needed to feed, clothe, and educate her children. She may
make and sell crafts, clothing, or food; or, she may buy fruit, vegetables, or fish wholesale to
resell. She may be a farmer who simply wants to purchase fertilizer or better seed so that she can
grow more food for her family and earn extra income by selling produce at the local market. She
has a plan to improve her life and that of her family, yet she is too poor to qualify for a loan from a
commercial bank. A village bank loan is clearly the best -- and perhaps the only -- hope she has for
improving her prospects.
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Where are the banks located?
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FINCA currently coordinates a network of 15 affiliates serving 14 countries in the Americas, Africa,
and Asia. We serve over 50,000 borrowers through more than 1,800 village banks.
Costa Rica, Dominican Rep., Equador, El Salvador, Guatemala, Haiti,
Honduras, Kyrgystan, Malawi, Mexica, Nicaragua, Peru, Uganda, USA.
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ach day, 40,000 children worldwide under the age of five will die from malnutrition or hunger-related disease. They are the victims of severe poverty. Yet most of these children could be saved if their mothers could earn an extra five dollars per week for food purchases. Through village banking, FINCA has provided thousands of destitute mothers with the means to improve their children's health and nutrition, their families' income, and their own self-esteem. By offering credit, not charity, to these mothers, FINCA village banking enables them to start or improve their own small businesses, which provide a steady source of employment and income for themselves and their families.
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