How village banking is improving lives of rural women

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Women in villages around the Kansanshi and Sentinel mines in North-Western Province are being empowered to fund small businesses and improve their financial know-how, courtesy of an innovative First Quantum Minerals’ community banking programme.

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 neighbourhood to save money and lend each other cash for start-up capital or expanding existing enterprises. This, in turn, helps to instil 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.

First Quantum’s community banking programme was inspired by a few small home-grown banks in villages around Kansanshi, which had quickly built up a base of investors and borrowers. The micro-credit model had immediate appeal, but the real key to these banks’ success was the fact that they were run by groups of women who were respected as informal community leaders.

Over 30 women attended the introductory workshop to community banking, held in October 2016 at St John Parish in Kimiteto, where the company explained the idea behind the scheme and to answer questions.

Kansanshi CSR monitoring and evaluation officer Gehane Ntaimo outlined the benefits of the village banking concept to the people in the communities and urged those present to make full use of the facility. As an alternative measure in managing portfolio risk, the Company has introduced the community banks to use of mobile banking.

This is meant to help keep the growing funds safe and create access to formal financial institutions such as commercial banks and mobile money operators. The members were acquainted with advantages of using this innovation which will enable them to use their phones conveniently to save money and make cashless transactions.

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 proved that community banking helps to boost the local economy as an automatic stabiliser in terms consumption at household level and stimulating production such as substance farming.

Bruce Lewis, corporate social responsibility manager for First Quantum’s Kansanshi mine, said that various livelihood-building strategies have been tried over the past ten years: “We’ve invested in projects ranging from fish farming to milling maize, and none have sustained momentum. With community banking, though, the response has been overwhelmingly positive for a programme that requires very little financial support beyond some modest infrastructure costs. Local people finance these banks with their own money, and we’re realising that’s precisely why they succeed.”

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.

On the banks’ side, half the profits are returned to investors and the rest are reinvested as loan capital. Typically, a successful bank revaluates contribution rates after the first year and finds that most members, having seen healthy returns, are keen to invest more. To secure funds not in circulation, First Quantum supplies a vault – a simple strongbox, triple-locked so that three key- holders must be present for any deposits or withdrawals.

FQM’s banking programme is inspiring villages to come together and develop their own responses to poverty. By selectively investing in home-grown economic ventures, communities have a sense of responsibility that encourages both disciplined management and pride in accomplishing goals – essential features of any sustainable enterprise.

“Over the past decade we’ve seen various groups come into these communities and hold workshops on launching small businesses,” said FQM’s Bruce Lewis, “but without a solution to the problem of financing, the specific points they’ve tried to teach really haven’t led to tangible outcomes. Now, with community banking, all of the pieces are in place. People can take out small loans, buy their inputs, grow their crops – with the high yields that conservation farming allows – and sell what they produce for a profit. 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.”

From experience a steady rise in the number of groups has been noted. This is mainly attributed to a “snowball” effect being a catalyst for such development. In all the groups that have been made, one or two groups have been formed out of the initial groups. This has showed the positive impact the initiative is having on the community and the willingness it has brought out of the people involved to educate and inculcate others in this venture. Even more so, it has helped in group cohesion and built trust in between FQM and the communities because of the mutual benefits that have resulted.

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