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Posts Tagged ‘governance’

A cluster of VSLAs in rural Rwanda. Clustering expands the market for governance, and enhances opportunities to ‘rewire’ networks.

The heart of VSLA is ‘time-limitation.’ The time-limitation feature is typically understood as an ‘action audit’ – a way for members to manage risk by giving them an opportunity to say “show me my money.”

A recent study of human cooperation[1] gives us a fresh look at time-limitation. There have been many doubts raised about cooperation: in particular due to the effect of so-called ‘free-riders,’ who exploit its benefits without contributing to its successes. However, (more…)

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If elite capture is such a serious threat, how was it dealt with during the microfinance revolution in Europe? F.W. Raiffeisen addressed this risk directly: he asked village elites to play leadership roles in the cooperatives – but to derive no material benefit from them.

In speeches he emphasized religious duties of charity and responsibility to community, and encouraged the villagers to elect leading individuals to the board, conditional on their character. Board positions received no compensation. Raiffeisen (more…)

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The ‘cooperative wave’ of microfinance gave way to the ‘microcredit’ wave in the 1970s. ‘Elite capture’ severely damaged the cooperative wave in the South. The story of the transition from the Comilla model to Grameen Bank, at the inflection point between the movements, is exemplary.

The ‘Comilla Model’ was initiated in East Pakistan by Dr. Akhter Hameed Khan in 1959. Khan drew inspiration from the Raiffeisen credit unions of rural Germany. He envisioned ‘vigorous local institutions’ that could provide credit and access to markets for the farmers of Comilla district. The cooperatives (more…)

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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 (more…)

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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, (more…)

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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 (more…)

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