Putting money aside to invest in a better life is common practice for many people in countries like the Netherlands. Yet in third world regions – where the average family struggles to put food on the table – the idea of saving feels a million miles away. But is it?
With Village Community Banking (ViCoBa), the prospect of group saving becomes a reality.
First, you form a group of 10 to 30 people. And, every week, each group deposits a set amount of money into one account. The more you put in, the more you’re allowed to borrow. And one by one, group members become eligible for a loan.
Micro business, macro trust
Two conditions apply to borrowing money.
The majority of the group must approve your business plan – based on whether the idea is realistic and if enough profit can be made. The majority must also believe that you will be able to pay back the loan in a given time frame, including a small interest percentage.
Because of this – and the fact that each member deposits a small amount on a continual basis – the total amount of the ViCoBa keeps rising. And the amount you can borrow grows along with it, as individuals earn each other’s trust.
Honesty is the best policy
But how can we ensure that everyone contributes equally? And what if they run off with the cash? Dorcas makes it impossible to cheat with three golden rules:
1.Use a vault
The ViCoBa groups store their cash in a strong vault, with a grand total of three locks. Three members look after the keys – and a fourth person is responsible for the vault. In order to open it, several members must be present.
2. Involve everyone in the administration
Every member has a personal administration booklet, where their individual contribution is recorded – much like blockchain technology. Nobody is able to grab a sum of money unnoticed.
3. Business skill training for members
Dorcas offers entrepreneurial training to help members launch their business. This ensures that they use the loan wisely. Members learn how to create a business plan and about work attitude, discipline, planning, saving and investing.
Simple, accessible, reliable, inspiring
These are words that participants used during our last evaluation. The method works – and it motivates members tremendously. If you borrow something from the group, you are required to pay it back. This type of peer pressure leads to personal ownership and ultimately better results. In Tanzania (read more below), members are even helping others in their communities start their own group, without any input from Dorcas.
We introduced ViCoBa in Terrat, a village in the Manyara district in Tanzania. Three members share their experiences:
“Together with other members I borrowed some money to learn how to make soap. Part of the loan paid for the training. We spent the remainder on ingredients. So far, I’m selling my soap to locals in the village and I hope to expand the business. The more I sell, the more I can borrow; invest, learn and sell again. It’s a positive circle!”
“Before I joined the ViCoBa group, my role in the family was to take care of the kids. My husband has an income but it’s not very high. Whenever I told him I needed anything, he refused to buy it for me. He looked down on me. Now I have invested in my own shop. I’m selling engine parts. I can spend the money I earn on what I want. I’m not as dependent on my husband and that gives me a lot of self-confidence.”
“I have lived my whole life on a farm so I decided to invest my ViCoBa loan in cattle. I bought one goat and started to breed it. I now have six goats and have sold a few as well. The goats provide a liter of milk every day. I use some of the milk and sell the rest.”
(caption Ednester Zelotte with Hr. Horns and Las, two of her goats.)
14 May 2019