written by Anne-Marie Robles, Kiva Review and Translations Program Intern
Typical bank loans in Peru require some sort of physical guarantee, but the village bank model uses a "social" guarantee, lending to a group of borrowers without collateral and encouraging self-monitoring and group-responsibility. This model of lending also allows Arariwa to reach more of the poor in the areas surrounding Cusco. Arariwa was founded by and remains highly connected to the Andean culture in Peru. This culture is marked by communal activities and support throughout the community. Group lending also provides an opportunity for Arariwa to reach out and coordinate savings and provide trainings to the local community. Arariwa´s village bank methodology is that each bank has 15 to 35 members, primarily women in poverty, who meet once a month.
To promote its village bank product, Arariwa visits each potential client’s house, maintains a presence at each town’s assembly and shows potential clients the benefits of working with Arariwa, like the savings products and education programs in addition to the loan products, and how the combination of education and savings can improve their quality of life.
Arariwa's clients are trained on the dangers of over indebtedness and the importance of savings and paying on time, so that they don't end up having financial problems. The education Arariwa's borrowers receive empowers the group members, raises their self-esteem, and improves their relationships with their family as the clients become more aware of how to positively interact with those around them and how to run their business better. In addition to education, the group-loan program has a built-in savings program, typically 3-5% of the original loan amount, and a micro-insurance service to protect borrower's families from inheriting the debt should something happen to the borrower.
Since partnering with Kiva in August 2008, Kiva lenders have funded more than 6,300 loans and lent over $2 million to Arariwa borrowers. Browse current Arariwa profiles fundraising on the Kiva site here !