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Village banking is a microcredit and saving methodology whereby financial services are administered locally in a community bank rather than in a centralized commercial bank. Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions (MFIs) as a way to control costs.
Community banking is a form of empowerment-based economics which falls under the larger umbrella of micro-finance.Micro-finance as a whole is focused on the entrepreneurship of individuals, generally with a goal of lifting low-income or disadvantaged groups out of poverty and providing the means for them to prosper. [3]
FINCA International is a non-profit, microfinance organization, founded by John Hatch in 1984. [1] FINCA is the innovator of the village banking methodology in microcredit and is widely regarded as one of the pioneers of modern-day microfinance. [2]
Solidarity lending involves collateral-free loans through solidarity groups and village organizations like this one in Bangladesh. Solidarity lending is a lending practice where small groups borrow collectively and group members encourage one another to repay. It is an important building block of microfinance.
A CVECA is a self-reliant village savings and credit bank (from the French Caisse Villageoise d'Epargne et de Crédit Autogérée).CVECAs are designed to operate in rural areas with clients who are primarily subsistence farmers, with minimal non-farm income.
In 2013-14, the Reserve Bank of India reclassified VFSPL as an NBFC-MFI. [8] In 2017-18, Village Financial Services Pvt Ltd became Village Financial Services Ltd and got its first private equity (PE) funding. In 2018-19, VFS saw its assets under management cross Rs 1,000 crore. The company has been included in academic studies of micro finance.
In 2005, the bank cut off funding for Ethiopia after the country’s authoritarian leaders massacred scores of people and arrested some 20,000 political opponents following disputed elections. A year later, the bank lifted its ban, launching a new strategy of funding local and state governments rather than central authorities.
John Keith Hatch (born November 7, 1940) is an American economic development expert and a pioneer in modern-day microfinance. He is the founder of FINCA International and the Rural Development Services (RDS), and is famous for innovating village banking, arguably the world’s most widely imitated microfinance methodology.