February 13, 2012 by Brett Hudson Matthews
Two rallying cries propelled the second wave of microfinance. First, in the 1970s it was ‘proved’ that poor people repay their loans; and second, we ‘learned’ that you can lend money to poor people and make money doing it. These statements may motivate people, but they are impoverished reflections of history.
The first wave of microfinance began in 1864, and rapidly spread over much of Europe, delivering both credit and savings in villages the banks would not touch. Reflecting on nearly 50 years of village finance practice, the journalist Henry W. Wolff wrote in 1910 that “… there has been found to be no more regular and more scrupulous repayer than the small man.” (People’s Banks, p. 27)
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Posted in Financial cooperatives, History, Microfinance | Tagged credit unions, Europe, Henry Wolff, property rights | 4 Comments »
Last month, CGAP hosted an international virtual conference on multiple borrowing and over-indebtedness. The conference generated a list of potential solutions to the problem — which did not include the delivery of safe, flexible savings services.
Why is no one acknowledging how important it is to offer quality savings accounts to poor people to reduce overindebtedness? Is it that some people at the forum genuinely have no idea what it would be like to have to pay for: their children’s primary education Continue Reading »
Posted in Microfinance | Tagged savings account | Leave a Comment »
Saving at home is convenient, private and predator-free.
In a study of 301 households that belonged to village financial institutions (VFIs) in 37 villages in Cambodia, my team from the Canadian Co-operative Association asked what would cause them to deposit more savings? By far the strongest response was: “the managers must show more respect for the rules.” (Towards Safety & Self-Reliance, p. 51.)
The rules to which they referred were not complex: they expected the managers to refrain from Continue Reading »
Posted in The village, Village institutions | Tagged accountability, Cambodia, governance, property rights, saving, village finance | Leave a Comment »
Krong Pailin, Cambodia. In the rainy season a 1-2 km trip can take much of the day.
Rural microcredit rates have risen sharply since the dawn of the microfinance revolution. Most modern rates range from 12-60% annually, with unsubsidized rates below 12% being extremely rare. The alternative for most poor borrowers is either no credit at all, or much higher informal rates.
At the dawn of the microfinance revolution, during the 1860s-90s, the Raiffeisen banks of rural Germany charged 5½% (per annum, declining balance) on small farmers’ loans, Continue Reading »
Posted in Financial cooperatives, History, Microfinance | Tagged elite capture, F.W. Raiffeisen, governance, microfinance, property rights, transaction cost | 1 Comment »
Savings bank in Cambodia. Keeping the savings promise is about far more than record-keeping.
Poor villages remain out of reach of many essential microfinance products. This is not a product development problem; it is a chronic and agonizing market failure resulting from a failure in the governance of microfinance transactions.
Oliver Williamson writes that “[a] governance structure is usefully thought of Continue Reading »
Posted in Microfinance, The village | Tagged governance, orality, savings account, trust, village finance | Leave a Comment »
November 21, 2011 by Brett Hudson Matthews
Arusha Women's Market. Villagers save at home from one harvest to the next, losing a lot of their savings.
The second afternoon of a three-day strategic planning workshop for a rural credit union in Kilimanjaro region. Five board members and the manager have just completed a pilot market survey in their village. Their board room is spacious and airy – though one wall is missing, and a kid goat sits comfortably under the manager’s chair.
They report back on what they have learned.
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Posted in Financial cooperatives, Microfinance | Tagged SACCO, saving, school | 1 Comment »
No 'village bank' for us!
NGO projects often discourage villagers from joining more than VSLA or other savings association. Why?
While consulting with MicroSave in 2008 I visited Mazarpara village in Lower Assam with Abhijit Sharma of the Indian Institute of Bank Management (Guwahati). In this economically active but poor village near Guwahati ‘accumulating savings and credit associations’ (ASCAs) started over 3 decades ago. The average household (among 72) held investments Continue Reading »
Posted in Microfinance, Village institutions, VSLA | Tagged ASCA, diversification, India, micro-audit, savings association, village bank | Leave a Comment »
At the Arusha Savings Group Summit, Bram Thuysbaert (Yale) and Beniamino Savonitto from Innovations for Poverty Action presented early evidence from a 2-year study of the impact of CARE’s savings associations (VSLAs) in Uganda, using randomized control trials. The results were unexpected.
The study compared ‘treatment’ villages where savings associations had been formed with ‘control’ villages where they had not. Conference delegates were told that members’ investments Continue Reading »
Posted in The village, VSLA | Tagged ASCA, field research, IPA, RCT, ROSCA, VSLA | 4 Comments »
September 29, 2011 by Brett Hudson Matthews
This group has been operating since 2006.
There are now many mature Village Savings & Loan Associations. Where are they going? What do they look like?
Mwanzo Mgumu is a 4th cycle association (originally incubated by CARE) in southern Zanzibar. The day we visited (on assignment with the Financial Sector Deepening Trust), 15 members were attending of all ages; 12 were women. This cycle they will meet weekly for 2 years.
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Posted in Village institutions | Tagged ROSCA, savings account, time value of money, transparency, VSLA, Zanzibar | 5 Comments »
A member-based perspective on Village Finance.
SMDP Tanzania 2011, scheduled to take place in Arusha from Oct 10-14, is a program uniquely designed for village finance practitioners. A basic banking rule of thumb is that there are 4 savers for every one borrower — with enough demand for savings to finance that borrower. SMDP Tanzania is the first program to truly embrace the needs of poor savers!
My colleagues at SMDP will cover VSL from a technical perspective. The course on ‘Village Finance’ will inject a fresh, field-based and member-based perspective on program design and strategy Continue Reading »
Posted in Village institutions | Tagged audit, governance, oral tool, SMDP, village finance | Leave a Comment »
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Two rallying cries propelled the second wave of microfinance. First, in the 1970s it was ‘proved’ that poor people repay their loans; and second, we ‘learned’ that you can lend money to poor people and make money doing it. These statements may motivate people, but they are impoverished reflections of history.
villagefinance 