Community banking models

This practice has existed in some form for centuries; in ancient Egypt, for example, when grain was often used as currency, local granaries would store and distribute the community’s food supply.

Micro-finance as a whole is focused on the entrepreneurship of individuals, generally with a goal of lifting low-income or disadvantaged groups out of poverty and providing the means for them to prosper.

It is generally initiated and organized by the collective rather than an outside institution (as is the case in more traditional models), and thus reflects the power of individuals in creating social change.

This model is closely linked to tenets of both social work in general and community organizing in particular, wherein each person is regarded with dignity and seen as a force for change.

The need for a community banking model arose out of the desire to lessen the gap of credit accessibility in rural areas and to stimulate the economy.

[8] The Tanzanian government in collaboration with SEDIT (Social and Economic Development Initiative of Tanzania) implemented a tool called Village Community Banks, or VICOBA.

Residents in several pre-selected villages voluntarily joined a group consisting of 30 members and then determined the rules and regulations of how the community bank would function.

Results showed the most common uses for loan funds were related to health care, investments in business and agricultural enterprises, as well as expenses for home improvements and school.

To be truly effective, many argue that a more transformative model would have to take place in order to have a lasting impact on the daily lives of community members.

Women were often unable to participate in the banks due to their husbands prohibiting them from becoming members; this was especially common in rural parts of the country.

[8] Based on the Freedom from Hunger study, several recommendations were made to Peace Corps Ecuador so as to make the community banking model more efficient.

Many of these focused on creating a standard of how to start a community bank including providing training to participants on accounting and group facilitation skills.