Let me introduce you to Carmen, Maria and Lina, from the group “Siempre 10 Al Progreso”. They live in the same neighbourhood in Lima, Peru’s capital, so they have known each other for a long time. But since 2008 they share more than their neighbourhood: they belong to the same “alcancía comunal”.
An “alcancía comunal”, sometimes referred to as a communal bank, is a self-organized group of borrowers who guarantee each other’s loans. Most of the loans at Edaprospo, the organization where I am placed, are given through this system.
Back in 2008 Carmen, Maria and Lina, decided independently to participate in a bijouterie workshop organized by Edaprospo. During one month, they learned side by side how to produce beautiful pieces of bijouterie. They still praise the teacher for her patience and expertise and most of all they praise her for having empowered them with a skill that has proved invaluable in their efforts to provide for their families.
After the workshop, it did not take much time until Maria had managed to gather 10 people to form the group “Siempre 10 Al Progreso”. It was not easy, she tells me. Initially the others did not want to join so Maria had to use all of her persuasion skills to convince them. With 4 children, and a widow since 10 years, Maria quickly saw the potential of such a group for her business and income.
And what is that potential?
Well, first of all, many of the members of the “alcancía comunal” would otherwise not be able to take loans because they lack a guarantee, i.e. they lack a stable income, a house or any other good that can serve as collateral. With the bank, if one member cannot pay the others pay in her/his place.
The second, and for me most important, aspect of the communal banks is the savings component. Every month, each member of the “alcancía comunal” re-pays his/hers loan and at the same time deposits a certain amount in the internal account of the group. After a few months, the internal account will have a considerable amount of capital and then the members of the group can ask for a loan to the group.
Groups that have existed for a couple of years, like “Siempre 10 Al Progreso”, managed to save a considerable amount of capital through the internal account so in practice the group doubles the access to capital for each of its members. As you can see, it is no coincidence that the savings are the one single aspect that most group members referred to me as the main advantage of belonging to a communal bank.
And a curiosity, for those of you worried about the high interest rates charged by some of the field partners: the group charges it members the same interest rate as Edaprospo, so it definitely does not appear that high to them!
The communal bank methodology provides not only access to credit and savings, but also has an impact on developing leadership skills, as the groups chooses their members, elects leaders, and manages it’s accounts independently (albeit with help of the loan officer).
For more on group loans, do not miss two excellent previous posts on the topic: “Demystified: Communal banking groups in Peru” from a previous fellow at Edaprospo and “Why you should support group loans on Kiva” for a detailed discussion on the pros and cons of communal banks.
Coming back to our group “Siempre 10 Al Progreso”: since that first loan went well, they never stopped. They use the loans to help keep their businesses going. Carmen, Maria and Lina are going to use the most recent loan to buy materials to start producing handbags and bijouterie to sell in December (summer time in Peru).
It is very easy to see the positive impact that the group, and Edaprospo, had in their lives. Carmen, Maria and Lina, as well as other members of the group, meet frequently to work and chat together. Even in the day I met them, the big “D” day – a day in which a new loan was going to be disbursed – they could not help discussing their work, giving each other tips on new techniques and felicitating each other’s skills. Since that first bijouterie workshop back in 2008, they have participated in other workshops and now they are also proficient in crochet, so they can make beautiful bags and wallets.
Lina tells me that the loans have not only helped her financially but have also brought her independence. “I changed a lot”, she says. “I used to be a sad and introspective person and now I speak, I chat, I convince people to buy my products”. She proudly tells people that she has made those products with her own hands and that is what she is really grateful for.
Eduarda Carmo Vaz is a Kiva Fellow happily working in Peru with Kiva’s Field Partner Edaprospo, a microfinance institution in Lima. If you enjoyed this post and would like to receive more news on Edaprospo’s work with the communal banks, please join the Fans of EDAPROSPO Lending Team. If you would like to support “Siempre 10 Al Progreso” or other groups from Edaprospo, you can also lend to EDAPROSPO borrowers here.