Zambia Update
Tuesday, 10 May 2011 06:07
While Collins moves Tractor, Victor learns Village Banking
Collins emailed me a few days ago to tell me he was arranging transportation for the 2 wheel tractor and implements to his farm in Chilupula. Meanwhile, Victor took three experts in Village Banking from Lusaka to Mansa to train our village friends in Chapi Village in creating a village bank.
Village banking is an alternative to micro-finance. I was startled to find that micro-finance, which I had always heard was a great deal for the poor, was not a great deal at all. High interest rates, immediate payments, and some sort of community wealth were all prerequisites. As an alternative, Zambia has created the Village Bank (however, they use a different name for it). In their concept, the village starts a cooperative bank, with each member depositing some money, no matter how little, at regular intervals, into the bank. They learn the process of giving loans, taking payments, and keeping books. They learn the law and the social aspects. Then they start the village bank.
Initially, the village bank only loans to its members. This is an excellent idea, since the members are the ones who understand the need for capital, the need for repayments, and the benefits of accumulating capital. Because the village bank sets the repayment schedule and the interest rate, they are, in essence, partners in the business. This gives all the members a vested interest in making each business work. And it gives them a vested interest in investing in only needed businesses.
So Victor and Mike Chunga took the villagers of Chapi into Mansa for the training. As you can see from the pictures, the people are studying the ins and outs of banking. They are excited to have their future in their own hands rather than in the hands of bureaucrats. To kick start their bank, Earth Charter US Board Members are giving them an initial $1000. We were told by community banking people that giving more than $1000 degrades the sense of ownership the members need to feel the necessity to pay back the loans. They will put the money into their local account, and then start throwing their own money in. After some period of time, to show they are serious, they can then start meeting to give small loans to their members.
As the village bank begins to create more capital they can expand into more diverse loan projects, including expanding to non-members, or developing community projects like power, sanitation, and education.
It is a true lesson in humanity that these people turn away from charity because they want control over their own lives. It is inspiring to see these people who live in a village where the average yearly income is around $1 a day gathered in a classroom to form their own bank. And it is a tribute to the power of provisioning capitalism that natural human incentives drive the creativity for these people to tackle the challenge of poverty outside the structure of government, NGO's, or religious organizations. The Earth Charter believes in the resiliency of the human spirit, if it is given the chance, to create the sustainable global community from the bottom up, one person at a time.