Community Banks

Community banks, started in Africa, mainly in Nepal and Congo about 20 years ago, implemented by Mr. David Walker who wrote and developed the set of workbooks used in the program with the financial support of the Office for Social and Economic Development -OSED- now BIDO.

In Honduras, implementation began in 2011 in the Department of Atlántida after training was provided directly by Mr. Walker to SAT coordinators and the Association’s technical and administrative staff.

Parallel to initiating the banks with SAT students, Bayan staff and some of their friends formed their own bank in order to gain first-hand experience and contribute to the corresponding consultations and accompaniment. Among the main expectations of the Bayan Association in implementing the banks is the establishment of its own sources of financing in the communities according to their reality and the strengthening of community life.

In order to foster the material well-being of their members, community banks promote the habit of saving and provide credit primarily to their members, oriented towards the execution of productive activities rather than consumption.

It gives its members an opportunity to develop skills in accounting and management, the proper use of credit, and encourages them to develop and expand their own small businesses. However, experience has shown that material development, by itself, does not lead to true progress and prosperity. The spiritual prerequisites for community development are equally or more important. Without unity, honesty, respect, cooperation, transparency, and a spirit of sacrifice, material development will not yield satisfactory benefits.

A community bank is a lending methodology in which a non-profit organization provides loans to a group of people who are responsible for the management and delivery of the resources.

The research project was carried out to examine the possibility of designing a credit delivery system to provide banking services to the rural population with very limited economic resources.

This operation has the following objectives:

• To promote a range of moral, ethical and spiritual values.
• Extend banking services to men and women with low economic resources.
• To teach young people how to start their own business.
• Create self-employment opportunities for the large multitude of unemployed people in the different areas of the country.

Members meet once a week for approximately one and a half hours. Credit applications and other financial transactions, such as savings deposits and loan repayments, as well as the disbursement of new loans, are all conducted at the weekly banking meeting ensuring complete transparency within the bank. A Board of Directors is elected by secret ballot by each of the members. The four officers who make up the Board of Directors serve a one-year term and are responsible for conducting the meetings and organizing the bank’s records on a four-month cycle, officers act as volunteers working hard in a spirit of service.

Discipline is important to preserve the unity and enthusiasm of the group. Fines are charged for tardiness, meeting absences, and failure to repay the loan as agreed. Seventy-five percent of the profits or dividends during each cycle are distributed among the members, 20% is allocated to the socioeconomic development fund, and 5% for administrative expenses, those who have more savings receive higher dividends, justice and equity are guaranteed through this profit distribution system.

• Proprietary materials (development manuals, administrative forms)
• Training
• Participatory methodology, focused around a strong conviction and development of the partners’ capacities.
• Community service (social action)

The banks, like all collective initiatives, require a certain organizational structure for their proper functioning. They adopt a simple model, consisting of a Coordinator, a Secretary, a Supervisor and a Treasurer, each of them fulfilling a specific but complementary role with the others. Through this structure, the bank receives support according to its own needs in order to reach a level of autonomous operation and can eventually provide accompaniment to other banks that require it in their respective jurisdictions.

The bank creates a community development fund with which provides its members with the opportunity to accumulate money earmarked to address some of the needs of the community. The purpose of the socioeconomic development fund is to give the community bank a source of money that can be used for projects chosen by the members through consultation. The members of the community bank along with the community members benefit from the projects carried out with the fund.