Village Community Banks VICOBA Programme
Following the successful introduction of the micro-credit methodology based on the Village Community Banks (VICOBA) model in the Sida-financed ‘Land Management Programme’ and ‘District Development Programme’ in Tanzania, ORGUT initiated a nation wide VICOBA programme in Tanzania in early 2008. This project created 2004 new VICOBAs in three years targeting some 60,000 rural people in the semi-arid and isolated rural areas of central, northern and southern Tanzania. The total amount of funds mobilised by 2004 saving groups was 9 Million USD by project end.
The VICOBA is a village savings and loans scheme based on groups of between 25-30 people saving together and lending to individuals within the group. Training and capacity building is the main component of the programme. The model is based on a year long training and follow up cycle. The first four months a field trainer guides the group through a number of topics ranging from savings and credit group responsibility and business planning after which they can start to loan money from the collective savings in order to start their own MSME. The field trainer then reduces his/her input steadily. After one year field trainer assistance is formally withdrawn and the group is free to either re-form or continue. The modality is built upon openness and transparency and generates confidence and an identity by allowing all members to participate in all transactions and influence all decisions.
VICOBAs have proved to be much more than a rural microfinance model causing unexpected positive ripple effects, such as improved governance, gender empowerment, greater access to education and health, better management of natural resources, and greater local empowerment and participation.
Financial Literacy: VICOBA’s role as a study circle for adult education in numeracy and financial literacy has enabled villagers to understand risks, interest rates, make business plans and calculate investment returns. This has raised awareness and capacities to demand more transparency and accountability within the community. More importantly, it expands the horizon for a wide variety of business opportunities and instils an entrepreneurial mind set.
Venture Capitalists: Many VICOBA’s now act like a local investor/entrepreneur in their respective villages, successfully investing profits, not capital, in income generating and productive activities, such as go downs, slaughter slabs, milling machines, cattle dips or water kiosks. These are small investments as is the revenue, but nevertheless profitable. In other instances, VICOBA’s will take over existing local infrastructure investments, generate a profit and set up operations and maintenance schemes. Once a VICOBA is up and running it can play an important role as venture capitalists in stimulating local economic development.
Social Responsibility: Most VICOBA’s are linked to other social services such as health insurance, participatory environmental conservation initiatives, livestock management and educational facilities for group members and their families. This could be a health insurance fund for members who get sick or die or an educational fund to support further training in literacy or batik production. Sometimes, funds are set aside for a collective good such as to support local HIV/AIDS orphans or simply planting trees.
Marginalised People: Most importantly VICOBAs have proven to be very successful in very isolated, illiterate and poor rural areas. They have the capacity to mobilise and enthuse socially and economically marginalised individuals and households to influence and master their own future. Experience shows that the majority of participants in VICOBA’s are women.