Peru

Village banks

In Peru poverty is concentrated on the Andies and  jungle regions. Cajamarca is located on the Andies plain in northern Peru. The Cajamarca micro-financing project supported by the Women’s Bank aims at improving the sustainable livelihood and quality of life of communities and particularly of women through a village bank organisation. The project also supports community development and underlines the importance of education and entrepreneurship.

With the support of the Women’s Bank 30 village banks (bancos communales) are being set up in Cajamarca and grant micro-loans to poor women to safeguard and develop their means of livelihood. Compulsory saving is one of the operating principles of the village bank; after a period of five years the banks become independent and have the possibility of continuing to operate using capital they themselves raise.

The maximum loan amount increases gradually from 45-120 euros in the initial stage up to 1 000 euros at the end of the fifth saving year. Village banks are formed by groups of approximately 14 women divided into 4-5 cells. Group members provide one another with entrepreneurial and loan management support; if one of the women is unable to make an amortization payment the cell is liable to pay this on her behalf.

By the end of 2009 17 village banks will be in operation with some 200 members. Banks will continue to be set up during 2010 after which the project will focus on consolidating their  operations and ensuring their continuity.

The women participating in the village banks’ operations are handicraft workers, farmers, cattle-owners and small shop-holders who are too poor to obtain loans from traditional financial institutions. The micro-loans offered by the village banks do not only benefit women but also entire families since they enable women to improve the livelihood of their families through their own means. Sustainable micro-financing operations on a sustainable basis improve women’s livelihood; in line with village bank principles the savings and loan operations in themselves ensure sufficient capital and the banks will not need additional financing after the initial capital input.

Women participate actively in village bank operations and in planning regional development; they receive instruction on banking administration as well as entrepreneurial training such as accounting and marketing.  In a male-dominated society it is also important to provide information on sound management practices and equality.

The project is carried out in partnership with the Peruvia Diaconia orgnaisation which for almost forty years has worked with communities on the Andies plains. Diaconia administers the loan capital within the framework of its own micro-finance programme and charges 3% monthly interest which is used for developing and monitoring the village banks.