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Community-managed micro-finance institutions

Community-managed micro-finance institutions. How they work and perform. Approaches. Externally funded: Not a successful approach. Leads to low repayment rates. Still used by many generalist agencies (“the poor can’t save”).

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Community-managed micro-finance institutions

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  1. Community-managed micro-finance institutions How they work and perform

  2. Approaches • Externally funded: Not a successful approach. Leads to low repayment rates. Still used by many generalist agencies (“the poor can’t save”). • Savings-based: Highest repayment rates. Dominant model in Africa. Adopted by most major INGOs. Very rapid growth. • SHGs: Mixed performance on repayment. Dominant model in India. Adopted by most local NGOs. Very rapid growth.

  3. Savings-based models • VSLAs: Village Savings and Loan Associations. Most popular model. Used by CARE, CRS, Plan and World Vision. Uses passbook-based records only. No ledgers. Stand alone • Saving for Change: Used by Oxfam only in Cambodia, Mali and Senegal. Uses memory-based records only. Mixes with one other activity • WORTH: Used only by PACT in Nepal and 5 countries in Africa. Only open to women. Uses centralised written records. Linked to literacy

  4. How does A VSLA Work– Current products and features • Savings: • Regular contributions (weekly, fortnightly, monthly) • Saving through share purchase: 1-5 at value set by group. withdrawal on demand • Meets basic needs, education, health business • Loans: • Loan criteria, loan term and interest rate set by group • Flexible repayments • Meets basic needs, education, health business • Insurance/Social fund • Criteria and benefits set by group • Grants, not loans (ideally, but this often varies)

  5. How does A VSLA Work– Group norms • Group size range: 10 – 25 • Membership criteria: Self-selected, open to men and women, free to exit at any time • Meeting frequency: Chosen by group. Weekly, fortnightly, monthly • Attendance: Obligatory, but flexible • Leadership structure: Democratically elected management committee (5 members) elected annually. My be removed by consent of 2/3 • Record-keeping: Passbooks and ending balances only. No ledgers. Treansactions carried out in front of members • Time to self-management/independence: 1 year

  6. How does A VSLA Work– The Kit

  7. How does A VSLA Work –Starting Balances

  8. How does A VSLA Work –Share Savings

  9. How does A VSLA Work –Loans

  10. How does A VSLA Work –Ending Balances

  11. How does A VSLA Work- Witness

  12. How does A VSLA Work No Ledgers =

  13. VSL: The Delivery System • Preparatory Phase • Training and 3-Stage Follow-up Phase • Graduation/ Action Audit

  14. VSL: Preparatory 1 - 3 Weeks • Orientation of Community Leaders and Administration Officials • Introduction of VSL to the Community • Preliminary Meeting with Clustered Groups of Potential Participants

  15. VSL: Training 9 Sessions in 1 year • Groups, leadership & elections • Social fund, savings & credit policies • Governance/Constitution • Record-keeping and meeting procedures • First share-purchase/savings (by end of week 2) • First loan disbursement (week 6) • First loan repayment (week 10) • Optional daily slot savings (week 14) • Share-out/action-audit (end of cycle)

  16. VSL: Phases 1 to 3 - Supervision 48-50 Weeks (approximately) • Intensive 12 weeks • Development 18 weeks • Maturity: Action-audit & graduation 18 weeks

  17. VSL: Recent Bangladesh results - Savings and loan growth

  18. VSL: Recent Bangladesh Results - Individual Savings Growth

  19. VSL: Recent Bangladesh Results - Returns to Members

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