Women in Business - Village Bank Operations Manual potx

Women in Business

Village Bank

Operations Manual

Table of Contents

Page

I. What Is a Village Bank?.....................................................................1

How is a village bank different from a regular savings and credit group? ......1

Who can join?.........................................................................................................2

Why does a village bank need to have 20 to 35 members?.................................3

How are new members trained?...........................................................................3

What are solidarity groups? .................................................................................4

Why do village bank members have to learn to read and write?......................4

Why should women contribute to the cost of the Women in Business

manuals? .................................................................................................................5

Why are all the village bank members supposed to have a business? ..............6

What about savings?..............................................................................................6

What about loans? .................................................................................................7

Why are loans given for only one to six months, and not for a whole year? ....9

Why are village bank loans small at first?...........................................................9

Why are village bank loans paid back in weekly installments? ......................10

What kinds of rules do village banks have? ......................................................10

What are the rules for safe money handling? ...................................................11

What kinds of things can go wrong in a village bank?.....................................12

How do we know if a village bank is healthy?...................................................13

II. How Does a Village Bank Operate?...............................................15

What are the duties of the village bank members?...........................................15

Who are the officers of the village bank and what do they do?.......................16

The management committee......................................................................................................16

The treasurer..............................................................................................................................16

The chairperson .........................................................................................................................17

The controller ............................................................................................................................17

The secretary .............................................................................................................................18

Assistant officers .......................................................................................................................18

How are the village bank officers elected? ........................................................19

How do the officers get trained?.........................................................................20

What is a village bank cycle? ..............................................................................20

Who screens the loan applications?....................................................................21

What about larger and longer loans? ................................................................21

Why do some women have trouble repaying their loans?................................22

How does the management committee solve collection problems? .................23

What does it mean to reschedule a loan?...........................................................24

What does it mean to refinance a loan?.............................................................24

How can a village bank increase the dividends it pays?...................................24

Increasing earnings..............................................................................................24

Reducing costs......................................................................................................25

How do group income-generating activities work? ..........................................25

What kind of venue, equipment and supplies does a village bank need? .......25

What happens at the bank meeting?..................................................................27

Before the bank meeting............................................................................................................27

During the bank meeting ...........................................................................................................28

After the bank meeting ..............................................................................................................29

Between bank meetings.............................................................................................................29

III. The Village Bank Accounting System..........................................31

How does the village bank accounting system work?.......................................31

Attendance and payment record ........................................................................33

Savings passbook..................................................................................................34

Savings journal.....................................................................................................35

Loan passbook......................................................................................................36

What is a loan equation? .....................................................................................37

Loan journal.........................................................................................................38

Debtor’s agreement..............................................................................................39

Description of personal collateral.......................................................................40

Cash control sheet................................................................................................41

Summary transaction sheet.................................................................................42

How are group activity expenses and group earnings recorded?....................43

Cash book .............................................................................................................44

Commercial bank passbook................................................................................46

Why do village banks need to open an account at a commercial bank?.........47

Financial statement..............................................................................................47

Balance sheet ........................................................................................................49

What are arrears? And what does it mean that a loan is “at risk?”...............50

How do you calculate arrears? ...........................................................................50

What is default? And what is bad debt?............................................................51

How does the village bank record an external loan?........................................51

How does the treasurer calculate the balance sheet? .......................................51

Loan statistics form..............................................................................................53

How does the management committee close the cycle?....................................56

What is the “end-of-cycle” balance sheet?.........................................................57

How are dividends calculated? ...........................................................................59

How do you round to the nearest dollar? ..........................................................60

What is an end-of-cycle audit?............................................................................60

IV. Developing Your Microenterprise ................................................61

Can village bank loans be used for anything?...................................................61

How big a loan should I take?.............................................................................61

Don’t we need training to go into business? ......................................................61

What kind of businesses can we do? ..................................................................61

What if women in our culture have never done business?...............................62

What can we do with these small village bank loans? ......................................62

How can we pay our loans back in just six months? ........................................63

How can we pay our loans back in weekly installments?.................................63

How can we find good business ideas?...............................................................63

What about our families?....................................................................................64

How can I earn money all year around?............................................................64

What does it mean to be an entrepreneur? .......................................................64

How can we improve our businesses? ................................................................64

How can we find a selling advantage? ...............................................................65

What is profit?......................................................................................................67

How much can I earn?.........................................................................................67

How do I keep track of my earnings and expenses? .........................................68

What is working capital?.....................................................................................68

Don’t let working capital leak out of your business .........................................68

A business health check.......................................................................................69

Glossary of Terms...............................................................................71

1

I. What Is a Village Bank?

How is a village bank different from a regular savings and credit group?

A village bank is a group of 20 to 35 women who come together because they want to

increase their income and improve their lives. Although a village bank is a bit like a

traditional Rotating Savings and Credit Association (ROSCA), it has many features

that make it different from a regular savings and credit group.

For example:

Bank meetings are held once a week.

The members give their village bank a name.

The members of the village bank elect a management committee.

The management committee is elected by secret ballot.

The management committee serves for a term of one to two years.

There are four officers who make up the management committee: a treasurer,

a chairperson, a secretary and a controller.

All financial transactions, such as collection of savings and disbursal of loans,

are done at the bank meetings, in front of the entire group.

The management committee keeps detailed records of every financial

transaction. That way everyone knows where every bit of the bank’s money is

at any time.

The management committee knows how to prepare an income statement and a

balance sheet. They do this after every bank meeting.

Every village bank has a calculator and all the members learn how to use it.

Every village bank has a cash box with three padlocks. Three different officers

keep the keys to the locks. The fourth officer keeps the box between meetings.

Many village banks open a savings account at a commercial bank in town.

Whenever there is more than 10 dollars in the cash box, all but $5 is deposited

in the commercial bank account for safekeeping.

Village bank women always have access to credit. But instead of giving each

member one big loan, the village bank gives women a series of small, short￾term loans. As soon as a woman pays back one loan, she can take another.

The small, short-term loans are designed to help women get started in business

or to grow the businesses they already have.

In credit programs where loans are provided by an outside agency, interest

payments go back to the agency to pay for staff salaries and other costs. But in

a village bank, the interest earned on loans remains in the group fund as profits

and creates wealth in the community.

Village bank members know how much of the group’s money belongs to

individual women in the form of savings. And they also know how much

profit the bank has earned from interest on loans, fees and other sources.

2

The village bank runs in six-month cycles. Every twenty-four weeks the

management committee closes the cycle and divides up the bank’s profits

among the members in the form of dividends.

Dividends are paid according to how much savings each person has. A person

who has more savings gets a bigger dividend.

In a village bank the members form solidarity groups. The solidarity groups

carry out group income-generating activities to earn extra money for their

fund.

The village bank is actually a business itself. Whenever it makes a profit the

members benefit, because dividends are increased.

Village banks hold at least one family gathering every cycle, where the

members invite their husbands or fathers and other family members to hear

about the village bank. Through these gatherings the whole family becomes

positive and supportive.

These are just some of the ways that a village bank is different from an ordinary

savings and credit group. Village bank members learn how to keep accurate accounts,

just like a real bank. They learn how to keep their bank growing and active, how to

handle money safely, and how to avoid corruption.

But the village bank is not just a place for carrying out financial transactions. It is also

a place where women learn to read and write, where they discuss new ideas and

practice management skills, where they find support and encouragement for their

business activities, and where they can plan programs to serve their community. The

main purpose of the village bank is to increase women’s income. But participating in

a village bank also helps women grow personally, become more confident, and take

better care of their families. In fact, the village bank can help the entire community

develop and become more prosperous.

Who can join?

As in many savings groups, members of a village bank should be at least 18 years old,

be honest and trustworthy, and they should be residents of the community. But unlike

most other groups:

Village bank members must be committed to learning how to read and write

and do simple arithmetic.

They should be open to working with women of all religions, castes and ethnic

groups.

They should agree to avoid gossiping and backbiting or bringing politics into

the village bank meetings.

They should be willing to attend meetings regularly, save, and abide by the

village bank’s rules.

They should be willing to get into business themselves and not take loans for

others.

They should have supportive families who will encourage them to participate

in the village bank and allow them to have their own businesses.

3

When you join a village bank you have to put in many hours of hard work. You also

have to contribute to the cost of the books that teach you how to read and how to

operate your village bank.

Village bank members expect one another to be trustworthy, cooperative and open to

new ideas. Village bank women do not blindly follow the old ways passed down by

their mothers and grandmothers. They look honestly at the traditions and practices

around them, and they are ready to change those traditions that are holding them back

and adopt modern practices that will help them and their families progress.

Being part of a village bank takes a lot of effort. But without dedication and sacrifice

how can women advance? Unless they learn new ways, how can their lives improve?

Village bank women want their children to be healthy, educated and well cared for.

They are willing to work hard and try new ideas because they want to be good

examples for their children.

The village bank offers each member the support and confidence that come from

consultation, friendship, shared goals and working together. As a group the members

consider what steps will help them make a better future for themselves, their families

and their community.

Why does a village bank need to have 20 to 35 members?

Village banks may start out small, with only 15 or 20 members. But in order to be

profitable and active a village bank should grow to around 20 to 35 members. More

members mean more savings and more people using the group fund for their

businesses. That means more women benefiting, more profits for the village bank and

bigger dividends for the members.

The village bank is not just a comfortable place where a few friends save and

sometimes take a loan. It is an institution that can serve many women in the

community. There will always be new women asking to join. Also, women may get

married and move away, or they may leave the village bank for other reasons. Those

women will have to be replaced. That’s why the village bank has to be able to accept

new members and grow.

How are new members trained?

New members may join the village bank at any time. Usually new members have a

sponsor, who is one of the current members of the village bank. The sponsor vouches

for the new member’s character and explains to her how the village bank works. If the

new member cannot read or write, the sponsor might help her or find her a volunteer

teacher. This is why some village banks like to admit new members at the beginning

of a cycle. That way, all the new members can learn to read in a group and study the

Women in Business manuals together.

Some of the well-established village banks have a training committee. The committee

consists of three or four experienced members who can explain to new women how

the village bank works and what their responsibilities are.

4

New members have to buy their books or borrow them from older members of the

bank. They should pay an entrance fee and start bringing their weekly mandatory

savings to the bank meetings. New members are not eligible for loans until they have

attended four bank meetings and saved four times. Because their savings are small,

their loans will be small at first and so will their dividends.

If the village bank grows to 35 members and still more women want to join, the group

should help the new women form their own village bank. Once membership grows to

more than 35, the bank meetings can take a long time.

What are solidarity groups?

In many village banks the members form solidarity groups. Solidarity groups are four

to six women, often neighbors or friends, who provide support and encouragement to

each other. Sometimes they help each other with their businesses. Solidarity groups

also carry out income-generating activities to raise money for the village bank.

Sometimes solidarity groups study the Women in Business manuals or other reading

materials together. In some village banks the solidarity group members screen each

other’s loan proposals and give suggestions. They can recommend to the management

committee whether or not a loan should be granted.

If one of the members of a solidarity group is having a problem with her business the

others might help her make her loan payment. Or if one of the members has to go to

the market for buying or selling, another member might look after her children. Since

the women in a solidarity group know each other well they can turn to one another for

help or advice.

Solidarity groups are informal and flexible. They do not have officers. They can add

members any time or replace members who leave the bank.

Why do village bank members have to learn to read and write?

Reading and writing open up the opportunity for self-learning. Although women may

learn many things about village banking from observing another group or by inviting

someone from an experienced village bank to show them how to keep their records,

no one has the time to teach them every detail about managing a village bank. But

women can learn those details by reading about them in the Women in Business

manuals.

When reading the Women in Business manuals, it is best to read and do the exercises

in a group. No matter how well a person reads, it is always useful to discuss the ideas

in the books and to think about how to use them. If the whole village bank cannot find

a time to get together to read the manuals, smaller groups of women can meet in

different people’s homes at times that are convenient to them.

In addition to their bank meeting, village bank members should try to meet at least

twice a week to study the Women in Business manuals. That’s at least three meetings

a week. Many groups meet even more often. Sometimes new readers meet six times a