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Village Savings and Loans

Written by CorpsAfrica/Malawi Volunteer Ms. Sarah Kazira

Village banks are everywhere in my community, and everybody is in one or two of them. I have been hearing so much about these village banks so I took it upon myself to investigate further about them. To understand more, I visited a couple of village bank meetings and I was able to observe and ask questions about how they work. I tried to join one but they said I was too late. Finally, I set up to interview two women whom I thought could explain more to me about the banks. I know I wasn’t fully able to understand everything about them but this is so far what I have learnt.

As I learned from these two women, there are two types of Village Banks. One is specifically for loans (the most notable one being the Microloan by FINCA). This is usually by an outside NGO which comes and lends the people money to be paid back by a specific time. The good thing about this type (or at least the one I was told about) is that it does not accumulate interest. You pay back exactly how much you borrowed. But before you can be allowed to take a loan, you have to pay an entrance fee and bring somebody to vouch for you. You also go through lessons on how to properly manage the money before they let you in.

The second one is more properly known as village savings banks. The village savings bank is where a group of people (Maximum of 30) meet every week and each member of the group deposits any amount of money they have to the account and it is recorded. Every member of the group is required to at least take a loan so that the money can generate a lot of income as there is an interest rate (Usually 20-30%). At the end of a specified time, (usually 6 months or 1 year) the group members meet to divide the shares plus interests. To add to that, there are some other small fees that they pay. For example late coming to meetings and being absent is fined. And every time you meet, you contribute a small fee known as “Chadzidzidzi” ( for emergencies). At the end of the specified time, this is the money they use to get each member a present, might be buckets, plates, or matching zitenjes (fabric).

The two kinds of village savings and loans have their differences, but their effects on the community are somewhat the same. People have testified that these loans have helped them in starting a business or reviving an old one. One woman told me how she was able to build herself a house with iron sheets using this money. People are now more business minded as they have a source of capital. The savings also help a lot For most, it feels like a big payday when they are given their share of the money (money they would have otherwise wasted if they hadn’t saved it). Furthermore if you are in a village bank, you are at least assured if getting something at the end of the year.

In spite of its benefits, these village savings and loans do not go well for everybody. Many people have fallen deep into debt because of this. Some do not know how to properly invest the money and so they just spend it without means of paying back. This leaves the other group members with no choice but to confiscate household items and sell them to recover their money. It has even seen some people sell their land to pay back loans. And some families have been broken because of this.

All in all, Village savings and loans are really helping people develop themselves in my community and I hope to be able to join a village bank before my service ends.

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