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Poverty is a vicious cycle: individuals are poor because they lack sources of
income; but in order to initiate income-generating activities, money is
necessary. In rural Nepal, banks are few and far between, and in those
that exist, loans are usually not available for the poor, due to lack of
collateral. Thus, struggling villages generally find it next to impossible
to come up with the necessary start-up capital for productive economic
activities. In order to achieve our objective of helping villagers initiate
sustainable income-generating activities and
community development programs, CCODER has
designed an innovative micro-finance tool –
the Community Bank -- to give rural
residents access to loans and to generate
funding for community projects. With the
help of Community Banks, villagers are able
to undertake infrastructure improvements,
establish schools and health care
facilities, and buy seeds, livestock, and
other items necessary for starting various
businesses.
Establishing A Community Bank
After completing Development Education,
community members begin setting aside seed
money in the form of savings. Once
sufficient preparations have been made and
members have undergone basic banking
education, a community development bank is
formed at the R-CDC level, with an initial
capital of approximately Rs. 1,500,000 (US$
20,000) from members’ savings.
The community banking
activities can be conducted only if members
understand the vital importance of savings
and of sharing profits with the community.
A systematic method, the "360 Degree Bank
Management Model," has been developed and
adopted for successful implementation of the
banking program. As its name suggests, the
"360 Degree Model" supports a complete
economic cycle, starting with the
application for, and granting of, loans;
including proper and efficient utilization
of funds; and finishing with complete
repayment of the loans, thus creating more
capital for the bank and benefiting the
community as a whole. Members are
educated about proper loan utilization, and
warned that loans can be dangerous if used
irresponsibly. Loans are given to the
people who are most likely to use them
responsibly. Repayment is currently
near 98.5%.
Special types of collateral:
Loans are not granted without collateral, but the collateral
is not physical. In fact, the collateral necessary for Community Bank loans
cannot be bought with money. Loans are granted on the basis of the borrower's
honesty, character, and conscientious fulfillment of the following
responsibilities:
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Regular monthly savings, even if it is only a small amount.
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Dedicated participation in the
10-minutes-per-day time donation
program.
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Participation in the monthly General Assembly.
This system is new and innovative and has
proved to be very effective in rural Nepal.
Operating efficiency, cost
effectiveness, and proper record keeping:
A manager supervises the daily operation of each Community Development Bank.
CCODER has been training managers to enhance their capacity and enable them to
operate the banks effectively. By setting market interest rates, reasonable
interest margins have been achieved. All community banks that are now in
operation are able to cover the cost of the manager’s salary and still earn a
sizeable profit, making the Community Development Banks self-reliant and
sustainable
Priority to disadvantaged families and women:
CCODER's programs include special activities to nurture and aid disadvantaged
families and women, just as hospitals provide special treatment for patients in
critical condition. CCODER helps these individuals achieve effective and
sustainable economic growth, by placing special emphasis on ensuring equitable
distribution of products and benefits, and equal access to resources. For
example, the very poor are given the opportunity to buy bank shares for half
price and are offered interest subsidies, special training, and other support as
needed. This helps reduce the gap between rich and poor in the community. |
