Village banking

Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions (MFIs) as a way to control costs.

Among US-based non-profit agencies there are at least 31 microfinance institutions (MFIs) that have collectively created over 800 village banking programs in at least 90 countries.

[1] [2] The latest developments globally can be seen in Southeast Asia (e.g. Laos), where digitization is pacing fast to reach rural areas with hybrid on- and offline solutions.

[3] A village bank is a (sometimes informal) self-help support group of 20-30 members, predominantly female heads-of-household or as a joint account per household.

[4][5] The village bank clients meet once a week or a month to avail themselves of working capital loans, a safe place to deposit money, exchange know-how, train skills, mentor, and motivate each other.

Most village banks in operation today are directly supervised by the staff of a local NGO or microfinance institution, from which they receive much of their loan financing.

A 2006 study of 71 microfinance institutions engaged in village banking found an average portfolio yield of 27.7%, after adjusting for local inflation.

Capital injection from a donor, NGO or a private sector project is a third method to secure the initial funding of a village bank.

One USAID paper from 1991 compares village banking approached in five countries: Thailand, Costa Rica, Northern Mexico, El Salvador and Guatemala.

[10] The "Alliance Foundation" mentions on their website, that their program opened 25 village banks on 3 continents (Guatemala, Mexico, India and Philippines).

[11] As of 2020, FINCA International reported that its 20 affiliates worldwide employed over 10,000 people,[12] primarily local staff including credit officers and supervisors.