After being well introduced in the project and the loan business, I took the opportunity to join Vasity and Mabvuto, two FINCA Loan Officers, to get a closer insight into the field work. It was a great experience which I enjoyed immensely. I was particularly impressed of how professionally Vasity and Mabvuto manage their Village Banking business and of how warmly I was being welcomed by the people in the compounds.
Village Banking was launched by FINCA Zambia more than 10 years ago. It has been one of the most successful products. Apart from Village Banking, FINCA Zambia also offers Small Group Loans for groups of five entrepreneurs and Business Loans for individuals as well as Insurance and Savings Plans.
Village Banking is designed to reach the poorest of the – still working – poor. As they lack any access to working capital, the small loans help them to build and further develop their businesses so they can earn more, become part of a larger marketplace, create jobs for others and thereby improve their families’ well-being.
Village Banking includes neighbours coming together in financial support groups called “Village Banks” of a minimum of 15 up to a maximum of 35 micro-entrepreneurs. In a few sessions they get trained by the Loan Officers – as by Vasity in one of the compounds close to Lusaka. They get informed on how Village Banking works, what the benefits and what the conditions are. As soon as everything has been clarified, they prepare their loan application and they decide on a group name and on roles such as Chairperson, Vice-Chairperson, Secretary, Treasurer and even Police.
Even though the loans are small, it is crucial to evaluate their business thoroughly by collecting information on their income and expenses before the loan is being granted. Because the clients have little to offer as collateral, it is the whole group which guarantees the loans. The analysis of their business and living standard takes primarily place in the field. The Loan Officer visits the working places as well as the micro-entrepreneurs’ houses – as I was doing with Mabvuto at a small store and on the market in one of the compounds close to Lusaka.
The Credit Committee decides on the loans and the loan amount. The disbursement of the loan takes usually place at the FINCA office whereas the fortnightly or monthly pay-back is being conducted in the field. If the group works well they can apply for a next loan, which – depending on their success – may even be raised.
The way out of poverty is long and challenging, but my first experiences in the field indicate that there are indeed promising ways. I aim at receiving answers on how those promising ways can be triggered and supported. I will keep you posted with my results and assumptions.