Village Banking
Background
Since commercial banks withdrew from rural areas and with the expense of travelling to those banks in urban areas, rural communities in Kenya have struggled to access financial services for even the simplest of transactions. Women in particular, who make up 80% of subsistence farmers in Kenya, have faced even further obstacles in accessing financial services, given that they are rarely named as deed or business owners and often deal in relatively small amounts of money.
In practice, the lack of banking facilities has meant not being able to send or receive money from relatives working in towns (often a vital source of income), not having access to capital to start small businesses or being able to keep the money they make from business safe, let alone get a return on savings. As a result, the lack of banking facilities has imposed heavy constraints on the ability of already marginalised peoples, especially rural women, to improve their standard of living in a region where approximately 65% of the population is living below the poverty line.
Whilst originally operating exclusively for women, a decision was recently taken by the banks to accept men as members and shareholders. It is hoped that this move will help support the continued growth and sustainability of the project.
Aims and objectives
Through the creation of village banks that are owned, managed and used by its members, Africa Now's village bank project aims to respond to the need for financial services in the region. This, in turn, is opening up many more opportunities for the population, bringing financial security closer to poor rural Kenyans and, in addition, the chance for them to take a step up, out of poverty.
Activities
The banks operate to provide access to credit and savings facilities and offer long-term financial security. Members buy a share into the bank at the cost of 300 Ksh (approximately £2) in order to be able to open a savings account. Unlike commercial banks, the village banks do not charge to make deposits and there is no minimum balance required. Africa Now is achieving these goals through:
- Holding public meetings with community chiefs and villagers to discuss how the banks work and the advantages of savings and credit.
- Training board members of each bank on personal financial management and how to run their own banks to become financially independent of Africa Now.
- Providing a secure safe with two keys for the float in the village.
- Providing stationery (passbooks, forms, account books, etc) sufficient for the first year of operation.
- Training staff and committee members to ensure efficient and effective management.
- Carrying out training for business planning.
Maintaining a focus on women
Although the village banks are now open to both women and men, the focus of the project is still women, who have been unable to access these kinds of facilities before now. Africa Now's experience has illustrated that placing financial control in the hands of women results in better family welfare, as well as higher loan repayment rates. Africa Now's partner in the project, the Kenyan bank K-Rep, has reported that the more successful and transparent banks are those with a majority of women as board members.
Latest Update
Africa Now's latest village banking project called has been operating in partnership with Kenya's K-rep bank since 2003. Whilst work is ongoing, a recent report has highlighted the success of the project. In practice, these successes have resulted in having a lasting and meaningful impact on the lives of thousands of people. Amongst these, impacts include:
- Vastly increased opportunities for entrepreneurship through access to credit.
- Ability to carry out money transfers so that the rural population can receive remittances from relatives living away from home.
- Access to a range of other life-improving financial services such as the cheque clearance service, which ensures that pensioners no longer have to travel long distances simply to access their retirement benefits.
- Income to shareholders through profits of the village banks.
Case Study
"I joined Gambogi Village Bank when it started so as to get a loan to stock my shop. I got a loan of fourty thousand shillings (approximately £300)and pumped it into my store. I have a lot of customers now and they get all that they require. I even hired assistants and I don't have problems with school fees anymore".
--Edith Mbone, Beneficiary of Women's Village Banks
Read our evaluation.
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