My Village (Credit Loan) Banking -

Village banking is a banking system that is implemented in economically challenged environments in order to help those that cannot get loans from traditional financial institutions. This is a type of microcredit that is popular in certain regions of the world. Here are the basics of village banking and how it works for those involved.

Support Group

The basic structure of a village bank is much like a support group. As many as 30 or 40 people from a village get together and talk about financial matters. They will have regular meetings in which they agree and discuss the issues associated with the village bank. Typically the support group is made up of the heads of households from homes in the community.

Within this group, individuals can ask for loans from the village bank. If you wait for meetings regularly and you are in good standing with the rest of the group, you should be able to get a small loan. The loans that are issued by village banks are typically very small compared to regular financial terms. These loans are traditionally for less than $100.

The loan is made to the individual who requests it and then they have a specific amount of time that they have to pay it back. They will make regular payments to the village bank until it is repaid.

Lack of Collateral

With this type of loan, they often do not require any kind of collateral. Collateral is usually not required because most of the individuals and the organization do not have anything to offer as collateral anyway. Instead of collateral, all of the members of the organization provide cross guarantees on everyone else's loans. If a loan was not repaid, the individual who took out the loan would be embarrassed to remain in the community. This type of loan uses social pressure instead of traditional collateral to enforce the loan.

Goals

The primary objective of village banking is to provide assistance to individuals who are in extreme levels of poverty. The hope is that by providing them with small loans, they can engage in business transactions that will eventually increase their wealth. Many larger banks in these regions will help provide financing for village banks. They will give them the money that they need at the market interest rate at the time.

Rates

The rates that are eventually charged to individuals who borrow from a village bank are above 25% in most cases. While this is much higher than what other areas of the world pay for interest, it is still less expensive than the other options that these people have. The only other sources for money are lenders that operate with the same type of structure as a payday loan or title loan. These entities could charge as much as 300% interest on short term loans. When faced with the choice, the village banking model makes more sense for individuals who are in this situation.

A village bank is an informal self-help support group of 20-30 members, predominantly female heads-of-household. If the program is "on mission", in a normal village bank about 50% of all new members entering the program will be severely poor—representing families with a daily per-capita expenditure (DPCE) of less than US$1; the rest are moderately poor (DPCE-$1/2/day) or non-poor (DPCE - $2). These women meet once a week in the home of one of their members to avail themselves of working capital loans, a safe place to save, skill training, mentoring, and motivation. Loans normally start at $50-$100 and are linked to savings such that the more a client saves the more she can borrow. The normal loan period is four months and is repaid in 16 weekly installments. 

dTo eliminate the need for collateral (the poor man's obstacle to receiving bank loans), village banks rely on a variation of the soilsolidarity lending methodology. It links on a system of cross-guarantees, where each member of a village bank ensures the loan of every other member. This system gives rise to an atmosphere of social pressure within the village bank, where the cost of social embarrassment motivates bank members to repay their loans in full. The admixture of cross-guarantees and social pressure makes it possible for even the poorest people to receive loans. This method has come very effective for FINCA, yielding a repayment rate of over 97% in its worldwide network. Village banks are highly democratic, self-managed, grassroots organizations. They elect their own leaders, select their own members, create their own bylaws, do their own bookkeeping, manage all funds, disburse and deposit all funds, resolve loan delinquency problems, and levy their own fines on members who come late, miss meetings, or fall behind in their payments.

Women in villages in Zambia are being empowered to fund small businesses and improve their financial know-how, courtesy of an innovative Petget Consult Groups' community banking program. Of the village banking model of micro-finance is a self-help revolution that challenges traditional attitudes about gender roles and encourages members of the same neighborhood to save money and lend each other cash for start-up capital or expanding existing companies. This, in turn, helps to instill an attitude of financial management at individual, family and community levels at large.
Today, more than 2.5 billion people in the developing world are considered financially excluded, with no access to basic financial services such as bank or savings accounts or credit.

There was some hope in the early years of village bank development that these small village organizations could become independent and self-financing, but this hope was later abandoned. 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.
Unlike cash, the mobile money facility is more secure, efficient and flexible. These members would make loan repayments by phone as well thus increasing their credit worthiness in the formal financial market. Kansanshi Mine has come from that community banking helps to boost the local economy as an automatic stabilize in terms in terms at household level and stimulating production such as substance farming.

Unlike cash, the mobile money facility is more secure, efficient and flexible. These members would make loan repayments by phone as well thus increasing their credit worthiness in the formal financial market.  The business model is simple. A group of about 20 community members comes together and decides on an equal contribution that everyone can afford. Once the bank has a pool of capital, the investors invite their fellow villagers to submit small-scale business proposals. A few are selected that everyone agrees are promising and entail minimal risk.

 Furthermore, the community members contribute for emergencies and they term it Social Fund. This fund allows for the group to deal with uncertainties that arise amongst members such as death of loved ones, hospitalization, accidents among other eventualities. In such instances, being able to access extra money can enable people to continue with their lives and avoid falling in worse situations than they were before. Therefore getting this additional money is not always tranquil. Most poor people will do so by trying to save some of the income they earn, or by borrowing. The village bank thus comes in handy in helping individuals cope with such eventualities.

The bank then extends credit on terms tailored to each borrower’s circumstances. Interest rates are not fixed and can seem extraordinarily high compared to those of the formal banking sector, but for solo entrepreneurs who just need a few Kwacha to get a venture launched, paying back the principal plus a significant premium – even as high as 100% – can seem quite reasonable when the baseline numbers are so small. 

The fact is, the people who benefit from these loans typically do so well, they are happy to pay rates that also reward the support of their neighbours. As everyone involved becomes more aware of how to manage money and get it working for them, we’re seeing the potential for poverty reduction on a large scale.”
This innovation has worked due to the fact that  strategic options for engaging the informal economy was used as follows in the context of Zambia:

1. Through the enhancement of policies that are needed to deal with high unemployment, lawlessness and tax evasion, all of which are often associated with the informal economy. 
2.  Many Countries like Zambia has  adopted explicit policies that encourage the development of the informal sector.
3. Private sector development is crucial for growth and employment creation in Africa, this has worked  through  the enhancement of tax revenues that enable more and better public services.
4. Through the promotion of informal-formal economy linkages.
5. Through the provision of safety nets for informal workers.
6. Through better measurement of informal production and employment and its contribution to economic growth. 

This new technology has worked in the sense that more women and youths  have made more investments in their businesses and many of them have managed to sponsor their children to go to schools, colleges and villages. Women are now able to feed their families and participate in public places thorough joint programmes and combined projects.

The COVID-19 pandemic is particularly threatening to informal entrepreneurs and the people who depend on them. Off the books and unable to access formal systems, these entrepreneurs are unlikely or unable to tap into health services or other relief measures. Meanwhile, workers in informal enterprises are usually excluded from social welfare systems.

It gets worse. In some countries, lockdowns implemented to control the spread of disease have completely closed essential marketplaces, often in a punitive fashion.  Zimbabwe’s government destroyed informal marketplaces and vendors’ stalls because they lacked the capacity to provide sanitization and did not possess legal titles. Confidential sources in Papua New Guinea—whose identities are being withheld at their request—told the Center for International Private Enterprise (CIPE) that authorities enforcing lockdowns have beaten women informal traders.

. The informal economy exists parallel to the formal economy as a space outside of a government’s ability to effectively regulate, protect, and tax. While it provides livelihoods as well as goods and services to millions of people, the informal sector is also associated with low productivity, low growth, tax evasion, and unfair competition.

Women and youths  are a source of every men's success in life and they should be given the needed support and respect.

1. Our emphasis is on the relative importance of the sector in the economy of West Africa
2. Our contribution is on the policy logic and implications for evidence-base policy development and innovation
3. Policy development and innovation can lead to improved performance of the informal sector particularly in the context of increasing need to reduce poverty and increase employment opportunities in West Africa
4. Initially, studies of informal sector tended to be decontextualised
5. Increased attention has been towards understanding the informal sector within its historical, geographical, political, and social context
6.  In the developed world, informal sector is often seen as a product and driver of advanced capitalism
7. By contrast, in the developing world the largest part of informal sector tends to occur in the form of self employment 

Through partnership and enhancement of networking by various individual groups:

1. Skills should be directly linked to the activities that areundertaken
2. The most marginalised and vulnerable groups are often driven by necessity rather opportunity motives to become informal entrepreneurs
3. Particular significance in the labour market
4. No single policy prescription can be applied in the entire sector
5. Policy instruments can include the development of skills and training, and provision of credit
6. The overall aim of these improvements is to transform what are often marginal and survivalist activities into decent forms of work
7. Policy proposals should be geared towards the formalisation of informal jobs
8. •These policy proposals often fail to recognise that many survivalist economic activities will never become more than what they are and should be recognised for the role that they play in reducing vulnerability of the poor
9. Our knowledge of informal sector still needs to be improved particularly the paucity of empirical studies to enhance evidence base policy development and innovation
10. Not enough policy guidance on how local municipalities can create an enabling environment for the development and promotion of informal sector
11.  Empirical studies can also assist in determining the effects of economic policy instruments on informal sector development and innovation 
12. In West Africa, new thinking about informal sector and its contribution to local economic development should be encouraged
13. New thinking encourages local municipalities to view informal sector as a key service delivery function

This technology is standardized in such a way that only the intended users can access their desired information and data input:

1. Our emphasis is on the role of training in creating more productive employment, strengthen skills base of informal sector entrepreneurs
2. Skills development among participants can help participants move away from subsistence activities and gradually progress towards value add activities
3. Other policy instruments are equally important – Finance, expanded markets and marketing
4. Social security schemes for the unorganized workers should be implemented as per the unorganised workers' Social Security Act, 2008.
5. Credit facilities to be made available to make initial investment and for further expansion for the informal workers.
6. The governments should evolve a mechanism to listen the grievances and the grievances should be redressed periodically to the informal labours.
7. Since agricultural labourers are unaware of various social welfare legislations and provisions available to various social divisions, the voluntary agencies in collaboration with Governments must give wide publicity through community organization. 
8. More importance must be given to the female in family also to improve the status of female agricultural labours.
9. Normally women agricultural labourers receive lower wage than the men even in doing identical jobs, although there is constitutional backing in the form of equal wage for equal work. 
10. The Government should take necessary Legislative measures were taken to confer occupation rights of house sites and agricultural land for the rehabilitations of landless labourers, the newly reclaimed lands were distributed to the landless labourer. 

It is user friendly. Both the central and state governments have formulated certain specific schemes to support unorganized workers but which fail in meeting the real needs and requirements of the unorganized labour force. The governments have made efforts to improve their working conditions in terms of occupational safety, working hours, payment of adequate wages to them so that the informal workers engaged in unorganized sector of employment may have mandatory decent and dignified work. Informal labour has, in different instances, been viewed as labour engaged in urban small scale enterprises, as self employment, as labour engaged in “traditional activities”, as wholly unskilled labour, and as labour whose use is not subject to any rules or norms. But none of this has any sound conceptual

or empirical foundation. Informality does not imply a particular mode or location of labour use; informal labour can be in self employment, in casual wage employment, and in regular wage employment, just as it can be in urban as well as in rural areas. There is little reason to think that informal labour must be concerned to 'traditional' and 'modern' activities

Small and marginal farmers, landless agricultural laborers, share croppers, shermen, those engaged in animal husbandry, beedi rolling, labelling and packing, building and construction workers, leather workers, weavers, artisans, salt workers, workers in brick kilns and stone quarries, workers in saw mills, oil mills etc. come under this category. To eliminate the need for collateral (the poor man's obstacle to receiving bank loans), village banks rely on a variation of the solidarity lending methodology. It relies on a system of cross-guarantees, where each member of a village bank ensures the loan of every other member. 

This system gives rise to an atmosphere of social pressure within the village bank, where the cost of social embarrassment motivates bank members to repay their loans in full. The admixture of cross-guarantees and social pressure makes it possible for even the poorest people to receive loans. This method has proven very effective for FINCA, yielding a repayment rate of over 97% in its worldwide network. Village banks are highly democratic, self-managed, grassroots organizations. They elect their own leaders, select their own members, create their own bylaws, do their own bookkeeping, manage all funds, disburse and deposit all funds, resolve loan delinquency problems, and levy their own fines on members who come late, miss meetings, or fall behind in their payments.

Attached agricultural labourers, bonded labourers, migrant workers, contract and casual labourers come under this.  In terms of Specially distressed categories. Toddy tappers, scavenger, Carriers of head loads, Drivers of animal driven vehicles, Loaders and unloaders come under this category.  In terms of Service categories: Midwives, Domestic workers, Fishermen and women, Barbers, Vegetable and fruit vendors, News paper vendors etc. belong to this category.

In addition to these four categories, there exists a large section of unorganized labour force such as cobblers, Hamals, Handicraft artisans, Handloom weavers, Lady Tailors, Physically handicapped self employed persons, Rickshaw pullers, Auto drivers, Sericulture workers, Carpenters, Tannery workers, Power loom workers and Urban poor

It will serves   over 50,000 people and in the next five years, it will serve over 200,000

Goals.

Goals

The primary objective of village banking is to provide assistance to individuals that are in extreme levels of poverty. The hope is that by providing them with small loans, they can engage in business transactions that will eventually increase their wealth. Many larger banks in these regions will help provide financing for village banks. They will give them the money that they need at the market interest rate at the time. 

1.capacity building

2.expansion to other countries

3.networking

4. engagements with government institutions and private sectors.

Challenges facing the informal economy must not be ignored as we think though pandemic responses and recovery efforts. Yet its largely hidden nature makes it easy to overlook. The crisis has disrupted informal businesses’ access to supply chains and their ability to distribute commodities, increasing food insecurity. Furthermore, the informal sector will likely only grow as formal employment drops. Business recovery will be stunted wherever informal status limits access to mainstream opportunities such as acquiring lines of credit, rights to public services, enforceable contracts, and business support services.

Public systems will be tested as tax revenues fall due to both recession and growing informality. Meanwhile, the regulatory and institutional weaknesses fostering informality in the first place could be compounded if trust in institutions drops, further accelerating entrepreneur withdrawal from formal ecosystems. Disparities in society are aggravated by the formal-informal divide and those in the informal sector are easily disenfranchised by their lack of legal rights.

1. Lack of funds to support the innovation

2. Too much criticism by the general public

3. Covid 19 pandemic

4.lack of confidence amongst the groups

Methods for coping with disruption can be found within the informal sector itself. These methods, particularly ecosystem approaches, digital solutions, and collective action, offer hope for more innovative solutions suited to the needs of informal communities. Ultimately, building bridges to formality will offer the best opportunity and strengthen public systems.l

One way to understand the specific problems and assets of the informal sector is through an ecosystem lens. In 2018, CIPE and SITE Enterprise Promotion mapped the ecosystem in Mathare, an informal settlement in Nairobi. The purpose of this exercise was to link Mathare and the greater Nairobi economy, to engage entrepreneurs collectively in policy dialogue, and to understand the barriers facing entrepreneurs. These barriers included public waste management, sanitation, electricity, clean water, and storage space for perishable goods – all of which have implications in a public health crisis.  

Having identified ecosystem gaps, CIPE and SITE convened public-private dialogue in search of solutions. This dialogue revealed opportunities for better planning and linkages. The county government committed to include the community in the budget planning process and to set aside open spaces that can be used for trading spaces. A process for allocating workspaces had the advantages of facilitating service delivery to business clusters and facilitating business linkages to the greater Nairobi economy. On the groundwork of the ecosystem initiative, SITE formed a partnership with the county chamber to link outside businesses with distributors in the Mathare market. 

Digital solutions might seem beyond the reach of informal business, but in recent years relatively sophisticated platforms have appeared. Twiga Foods combines a mobile ordering platform, a licensed distribution facility, transparent pricing, and financial services to bring informal vendors into the formal market for produce and other retail goods. Another successful digital platform is Lynk, a website and smartphone application connecting independent service workers such as cooks, electricians, and plumbers to households or formal businesses seeking specific services. These platforms have evolved, gaining functionality to build confidence in transactions, thereby demonstrating the informal entrepreneur community’s capacity to work and collaborate outside of public regulation.  

Thus, the digital market offers new opportunities for market entry and relationship building. Mobile phone banking platforms could facilitate access to formal financial services by  reducing the transaction costs of serving informal business and allowing businesses to build credit histories through digital payments. A cashless economy also facilitates transparency and auditing of transactions for compliance with tax laws and other regulations. Although growing linkages to formal financial services are indeed welcome, it is important to remember that the path to innovative financial services still depends on an enabling regulatory environment for e-payments and fintech, and that the growth potential of financial customers is still tied to their legal status.

Throughout the COVID-19 pandemic, CIPE has observed business associations leading and coordinating business responses, sometimes being better informed and prepared than governments. Informal sector business associations continue to actively inform members about safety practices and financial relief, conduct charitable relief efforts, and communicate priority business needs to policymakers.

Non governmental organisation

5 people have formed a team

The rates that are eventually charged to individuals that borrow from a village bank are above 25% in most cases. While this is much higher than what other areas of the world pay for interest, it is still less expensive than the other options that these people have. The only other sources for money are lenders that operate with the same type of structure as a payday loan or title loan. These entities might charge as much as 300% interest on short term loans. When faced with the choice, the village banking model makes more sense for individuals who are in this situation.

FINCA

The prevailing vision of the 'informal sector' is one of survival, low productivity and very little value added. But this has been changing, as more and more importance is placed on small and medium enterprises (SMEs) - for generating employment, for increasing income and providing services which are lacking.

Policies have generally focussed on direct interventions in the form of supporting systems such as training, technical advice, management principles etc.; and indirect interventions in the form of an enabling policy and market environment.

A key component that is always incorporated as a sort of common denominator has been finance, specifically microcredit - in different forms and for different uses. Microcredit has been provided to SMEs directly, or as a part of a larger enterprise development programme, along with other inputs.

Village banks are community-based credit and savings associations. They typically consist of 25 to 50 low-income individuals who are seeking to improve their lives through self-employment activities.

Initial loan capital for the village bank may come from an external source, but the members themselves run the bank: they choose their members, elect their own officers, establish their own by-laws, distribute loans to individuals, collect payments and savings. Their loans are backed, not by goods or property, but by moral collateral: the promise that the group stands behind each individual loan.

The Village Banking model is closely related to the Community Banking and Group models. This model is widely adopted and implemented by FINCA.

The Group Model's basic philosophy lies in the fact that shortcomings and weaknesses at the individual level are overcome by the collective responsibility and security afforded by the formation of a group of such individuals.

The collective coming together of individual members is used for a number of purposes: educating and awareness building, collective bargaining power, peer pressure etc.

The Group model is closely related to, and has inspired, many other lending models. These include Grameen, community banking, village banking, self-help, solidarity, peer pressure etc.

One example of the Group Model is "Joint Liability". When a group takes out a loan, they are jointly liable to repay the loan when one of the group's members defaults on the repayments.

Community Banking model essentially treats the whole community as one unit, and establishes semi-formal or formal institutions through which microfinance is dispensed. Such institutions are usually formed by extensive help from NGOs and other organizations, who also train the community members in various financial activities of the community bank.

These institutions may have savings components and other income-generating projects included in their structure. In many cases, community banks are also part of larger community development programmes which use finance as an inducement for action.

Ensuring that no one is left behind in achieving the required goals. Ensuring that the objects set up are actualised and  implemented accordingly.

Networking, partnership and business orientation programs

Events planning, village banking, secured credits and loans

Loans, grants and receiving of charities

Estimated expenses for ,2020 is USD50,000

Because it provides a platform where the funds if are approved can be accountable for. There is also transparency exhibited in the manner the funds are disbursed.

Networking

UNICEF