Women in Business - Village Bank Operations Manual potx

To be in good standing, a member must attend bank meetings and save regularly, make her loan payments on time and abide by the bank’s rules.. Deserving women are those who are active and

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

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

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

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

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

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

week to study the manuals Those who are better readers can help the new readers understand the material And if there are new words or ideas, the more heads trying to understand them the better! Then at the bank meeting everyone can ask questions and discuss any difficult parts

Being able to read the manuals and do simple arithmetic make it possible for all of the village bank members, not just the management committee, to understand how the village bank works Every member can add up her savings, figure out her loan

equation and even calculate her dividend

It is difficult to cheat people when they know what’s going on That is why village bank members learn how to be money smart They learn how to recognize money, how to add and subtract it and how to count change They know how to examine the village bank’s records to make sure money is not being misused And they know how

to calculate whether or not they are making a profit in their own businesses

Later, once women learn how to read, they can find out about good health practices, how to take even better care of their children, about their legal rights, or about how to find good business ideas, all on their own and in their groups They do not have to wait for an outside agency to come to their village and offer them training Women who are literate can progress at their own pace and learn as much as they want to They are independent They can stand on their own feet They are empowered!

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

The purpose of the village bank is to help women stand on their own feet This will never happen if women are always dependent on outsiders, if they always wait for others to provide things before they can go forward From the very beginning the women in the village banking program learn how to do things for themselves and how

to pay for the goods and services that they value

Like learning to read and write, a healthy attitude about paying for services, and not waiting for things to be provided for free, makes women independent and puts them

in control of their own future An attitude that ―we can do it,‖ and a willingness to take responsibility for one’s own development, are important if the village bank is to

be sustainable and move women forward This is why the members of the village bank begin by taking responsibility for their own literacy classes

In the literacy programs run by the government and by NGOs, usually everything is provided—a teacher, books, lanterns, kerosene, a blackboard, even pencils and

notebooks But a woman has to wait for a provider to come to her neighborhood before she can join a class And if enough women cannot be found who are willing to join a literacy class, her community might not get a class at all!

But women in village banks find their own volunteer teachers If only a few women are illiterate, they can learn together in a small group If none of the members of the economic group can read or write, one of the school-going children can act as the volunteer tutor By managing their own class, women learn that with just two simple books and each other’s help, they do not need to depend on any outside agency to make them literate!

This understanding is important because women need to realize that their fate lies in their own hands and not in the hands of others If they need pencils or paper or even some kind of technical assistance or training, they learn how to raise money and go out and get it

In addition to paying for books, women usually pay a small entrance fee to join the village bank This fee may range from $.25 to $1, depending on what the group

decides The entrance fees provide the village bank with a certain amount of cash so the group can buy some necessary supplies, like a cash box, a calculator and

accounting forms

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

It is very possible that a woman, when joining the village bank, has no business experience But one of the purposes of the village bank is to raise the economic

condition of its members For that reason, even if a woman has no previous business experience, she should be someone who is interested in finding a business idea, is willing to go out and try it, and who is ready to overcome her fears and inhibitions about selling

It is easy to just sit home and save But without effort there can be no progress The village bank is for women who want to move forward, who want to be an example for their children, who want to earn more so their children can get educated, can get the medicine they need, can dress well and eat better food We need to learn how to make money as well as save it The village bank is designed for women who want to see their families get on the road to prosperity That should be made clear to anyone who wants to join the village bank

That is the reason why village bank members do not take loans for others It is fine if other members of the family help them with their businesses, but they must be

themselves the owners and managers Otherwise women will be stuck paying off a loan that someone else is using

What about savings?

At each bank meeting, just like in a traditional savings group, the members deposit a certain amount of mandatory savings The exact amount is discussed in the group and agreed upon by all But women try to save as much as they can in order to build up their group fund quickly Mandatory savings for each member may range from $.10 to

$.50 a week But in most village banks the rate is $.20 a week In addition to

mandatory savings, each member should try to deposit as much voluntary savings as she can

One interesting thing about the village bank is that all the members do not have to have the same amount of savings That way, women can deposit different amounts of voluntary savings Also, women who join the group later can simply start bringing their weekly mandatory savings They do not have to match the amount saved by everyone else Every member has a passbook to keep track of how much she has

saved At the end of each cycle you earn dividends based on the amount of your savings Those with more savings get bigger dividends

For the first three years mandatory savings cannot be withdrawn unless a woman leaves the village bank But once the members feel that their group fund is big enough

to satisfy everyone’s credit needs, they may decide that women can withdraw some of their mandatory savings without having to leave the bank Voluntary savings, on the other hand, may be withdrawn at any time Often women keep some voluntary

savings in the bank for emergencies or to pay for family expenses such as school fees

or household repairs

Many women feel it is difficult to save But if you could save even one penny a day,

in just six months you would have $1.80 in savings If the village bank gives you a loan worth five times your savings, you could then begin taking a series of short-term loans from the village bank starting with a loan of $9.00 That would be enough to get you started in a small business Once you are in business and have regular income you will not have trouble saving even two pennies a day By the end of a year you could have $7.20 in savings Then you could get loans of up to $36.00 from the village bank

to grow your business This is how a woman starting with very little can gradually improve her economic situation

If a woman is really poor, you may think, how can she save even one penny a day? People should look at saving as one of their regular necessary expenses Just as

everyone has to buy salt and spices, village bank women have to save You can look

at your present expenses and try to cut back on things that are unnecessary Smoking cigarettes is an example Sometimes you may have to ask other family members for help But without sacrifice it will not be possible to accumulate even a little bit of wealth Village bank women and their families make sacrifices because they know that this is the way to a better future

In some communities there may be very poor women who want to join the village bank Perhaps they cannot afford to pay as much mandatory savings as the other bank members are ready to pay In such cases the bank members may agree to let the poor women save at a lower rate until their businesses become established and they can earn enough to save like the others Women with smaller savings will get smaller dividends and will be eligible only for smaller loans, but at least they will have a chance to get started on the road to better income

What about loans?

To be able to take a loan from the village bank you have to be a responsible member

of the group Members who are in good standing have priority when it comes to getting loans To be in good standing, a member must attend bank meetings and save regularly, make her loan payments on time and abide by the bank’s rules

Here are some other special features about village bank loans:

Village bank loans are not given for household consumption—things like paying for weddings or funerals or for repairing your roof Women may have trouble paying such loans back Village bank loans are given to help women

carry out all kinds of business activities If you put the money you borrow into

a good business you will have no problem paying it back

Village bank loans should not be passed on to other family members Family members may help a woman with her business, but she, herself, should be the owner and manager A woman who passes her loan on to others has no control over how the money is used, yet she is responsible for paying it back

Before taking a loan a woman must present her business idea to the group The group will know if the woman really has a business and if the size of the loan

is appropriate

Village bank loans are usually small at first But they get bigger as a woman proves she is capable of managing her money and paying back her loans on time

Village bank loans are given for short periods of time, from one to six months

at first These short-term loans encourage women to look for

income-generating activities that are more profitable than traditional agricultural or livestock work

Village bank loans are paid back in weekly installments This way women begin to look for business activities that turn money over quickly Businesses that involve frequent selling are the surest and quickest way to increase family income Also, weekly installments are small and easier to manage for women who are just getting into business

When women repay their loans in weekly installments it means that every week money is coming back into the bank That way other women can get loans quickly Also the more actively the group fund is rotated, the more profit the bank will make and the bigger everyone’s dividend will be

Interest on a village bank loan is usually $2 per hundred (or 2%) per month, which is the same as 24% a year Interest is taken out at the time the loan is given The initial loan disbursement is the principal minus interest

Once the group fund is large enough to meet all of the members’ needs, the group may decide to allow some women to make their loan payments

monthly But women who make monthly payments should pay 2.5% interest per month, because they are keeping the group’s money out for a longer time and others cannot use it

After all the credit needs of the members are satisfied, a village bank may make loans to non-members These loans can be made to men or to women, but the borrowers should be trustworthy and well known to the village bank members Such loans are usually given at 3% per month

Most village banks make a rule that a loan cannot be more than five times a person’s savings A woman with $10 in savings, for example, could get a loan

up to $50 But a woman with only $2 in savings could borrow only $10

No loan to any individual, whether a member of the village bank or an

outsider, should be worth more than 10% of the group’s fund

Before taking a loan women must sign a debtor’s agreement, which is a piece

of paper acknowledging her debt and promising to repay her loan Women also sign a personal collateral form on which they promise to hand over

something of value to the bank if they do not repay their loan on time

Since non-member borrowers have no savings at the village bank, they must deposit personal collateral, equal to the value of their loan, with the treasurer Non-members also sign a debtor’s agreement and pay their loans back in weekly installments, but they are not required to attend the bank meetings Loans made at the beginning of a cycle may be for 24 weeks But loans made later in the cycle are for 20 weeks, 16 weeks, 12 weeks, 8 weeks or 4 weeks This is because all loans should be repaid by the end of the cycle so the

management committee can close the cycle and distribute dividends

During the first two 24-week cycles the management committee has to learn the accounting system and the members must learn to repay their loans on time If the village bank can close two cycles successfully, the bank may begin

to offer deserving women bigger and longer loans, for up to 8 or 10 months These are called cross-cycle loans Deserving women are those who are active and regular members of the village bank, who have a growing business, and who have repaid at least three loans on time

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

One of the purposes of the village bank is to encourage women to think hard about ways to earn money It may be easy to raise a goat or to plant corn, but these

traditional activities do not generate a lot of income and they are not going to make women prosperous To really make a change in their economic condition women have

to break out of these traditional kinds of work

Village banks make short loans to encourage women to speed up their selling With a four-month loan a woman can buy a small goat rather than a newborn, and fatten it for two or three months, and sell it for a profit Meantime she can sell snacks to make her weekly payments She can grow vegetables But while her vegetables are growing she can also buy vegetables from local farmers and sell them By taking and repaying several short loans a woman can earn more than she can from one big, long loan Once a woman has more business experience and has proven that she can pay back her loans on time, it is possible for the village bank to offer her longer loans—perhaps for eight months These are called cross-cycle loans because they do not have to be paid back by the end of the cycle But these longer loans have to make sense for the kind of business the woman is doing

Why are village bank loans small at first?

Village bank loans start out small for several reasons First of all, the group fund is built up from the savings of the members In the beginning the group fund is probably quite small Also, women need to have experience putting borrowed money to work and paying it back before taking on the responsibility of using bigger loans

Small loans may not be good for buying expensive fixed assets like a kiosk or a cow They are better used for working capital A woman can use a small loan to buy things for resale or to buy things that she can work on and add value to, like turning fruit into chutney, milk into candies, or raw rice into beaten rice

Women in village banks do not get big loans until their group fund has grown and everyone’s credit needs are being met Rather than getting ―a loan,‖ they get a ―line of credit.‖ That means as soon as one loan is paid off they get another and possibly a bigger one As long as they are in good standing, they always have access to credit from the village bank Their loans get gradually bigger and bigger as their businesses grow and they gain more experience Once the group fund is big enough and a

member has proved that she is creditworthy, because she has borrowed many times and always repaid her loans on time, then the village bank can give her a bigger loan for a longer period of time

Why are village bank loans paid back in weekly installments?

Weekly installments may be hard to manage at first, but they have several advantages One advantage is that the loan installments are small If installments were once a month they would be four times as big! It might be difficult to come up with so much cash at a time

When loans are paid back in weekly installments there is always money coming back into the village bank That way other members do not have to wait for such a long time to get their loans And as more loans are given out the village bank earns more interest That means bigger profits for the bank and bigger dividends for the members The village bank is like a second business for the members To make their village bank profitable, the members have to rotate their fund as actively as possible

More importantly, weekly loan payments mean women have to have weekly income They have to do activities that involve frequent selling, and these kinds of businesses are the most profitable To be in business you have to sell, and the more frequently you sell the better Women who sell regularly have no trouble paying their loans back

What kinds of rules do village banks have?

Village bank members are serious about making a better future for themselves In order to ensure good discipline, many village banks have strict rules that the members all agree to abide by Most village banks impose fines on people who break the rules Here are some of the rules that you will find in most village banks:

People who miss a bank meeting without a good excuse or without sending advance notice to the secretary must pay a $.05 fine

If anyone is more than 15 minutes late to a bank meeting she must pay a $.01 fine

If anyone misses one of the scheduled study classes she has to pay a $.01 fine

If anyone fails to bring or send her mandatory savings to the bank meeting she has to pay a $.03 fine

In some banks the chairperson reads out the names of all the borrowers who are behind in their loan payments

In some village banks women have to pay a $.05 fine if they are late making a loan payment If they are late again the fine goes up to $.10 for every missed payment

If a loan is not fully repaid by the due date, the bank may use the person’s savings to pay off as much of the loan as possible If the woman’s savings are not sufficient she must turn her personal collateral over to the bank treasurer

If a woman cannot fully repay her loan by the due date because of some

misfortune, the bank may decide to give her extra time to pay without penalty This is called ―rescheduling a loan.‖

If a woman has a big loss due to some misfortune, but she is a member in good standing, the bank may decide to give her an additional loan to pay back her first loan and re-establish her business This is called ―refinancing a loan.‖ Since dividends are based on how much savings a person has, if a woman has

to use her savings to pay off her loan she may not get a dividend

Any bank officer who misuses the bank’s money must repay the money and should be removed from her office

Any woman who abuses the bank or acts irresponsibly can be kicked out

Usually the secretary reads out the rules at the beginning of every bank meeting Most

of the members appreciate the rules and the need to pay fines, because the rules

protect their money and the fines go into their group fund Members that consistently miss meetings, break the rules or do not pay their loans back on time may have to wait longer to get a loan, or they may get smaller loans If they persist they might be asked

to leave the bank

What are the rules for safe money handling?

For everyone’s protection the village bank should have strict rules for safe money handling Here are 10 rules that many village banks have to ensure their money will not be misused or lost

1 All banking transactions should be made during the bank meeting in front of the whole group

2 Only members of the management committee may open the cash box outside

of the bank meeting They may need to take money out for deposit in the commercial bank or for administrative expenses

3 Only members of the management committee may authorize or pay

administrative expenses for the village bank These must be reasonable and receipts should be gotten whenever possible

4 Only the treasurer handles cash during the meeting If any cash is missing she

is responsible and must make up the difference herself

5 If there is $10 or more in the cash box at the end of a bank meeting, a deposit should be made in the commercial bank account within 24 hours All money in excess of $5 should be deposited, leaving only $5 in the cash box

6 At least two members of the village bank must go to deposit or withdraw money at the commercial bank If the treasurer cannot go, she should prepare the bank deposit slip The deposit slip and bank passbook should be returned

to the management committee the same day, properly filled out and stamped

by the bank

7 At the start of every bank meeting the members should inspect the commercial bank passbook and deposit slip to see that the money was deposited within 24 hours

8 The cash box should have three locks and different members of the

management committee should keep the keys The fourth management

committee member keeps the box

9 All entries on forms, journals and passbooks should be neat, accurate, honest and up-to-date

10 If any member of the management committee is found to have made personal use of group funds, she should be removed from office

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

There are four bad things that can happen to a village bank: corruption, stagnation, indiscipline and incompetence

Corruption happens when someone steals money from the village bank or uses the

village bank’s money for personal profit Every village bank has rules for safe money handling But sometimes the officers become lax What if an officer does not deposit the bank’s excess cash in the commercial bank immediately, but ―borrows‖ it for her own personal use? What if the treasurer accepts a savings payment outside of the bank meeting and just pockets the money and does not record it?

Everyone should carefully follow the rules for safe money handling The management committee must be honest and transparent in its dealings It must be able to resist pressure by members, leaders and even outsiders

Stagnation happens when membership declines rather than grows, when members

leave the bank and are not replaced Stagnation also happens when savings taper off,

or when members start using their mandatory savings to make loan payments It happens, too, when the group fund is not fully utilized and some of the money sits idle When things like this happen dividends decline In a healthy bank all these things should be growing

To bring a stagnant bank back to health, sometimes a change in leadership is required Also the women may need to recruit new members who will work hard to keep the bank active and growing

Indiscipline is the situation when members start missing meetings or coming to the

meetings late, or when they get into the habit of making their loan payments late Late payments reduce the bank’s earnings because the money cannot be lent out to others

If a member becomes careless the bank may decide to stop lending to her until she straightens out If she does not, she might be asked to leave the bank

Incompetence means that the management committee and the members cannot

manage the bank meetings properly Perhaps the management committee cannot fill out the accounting forms on time or keep track of the funds What if the committee cannot calculate dividends or open and close a cycle correctly? What if there is

disunity in the group and the management committee cannot provide a unified and caring environment for all of the members?

When the management committee feels it is over its head in problems it should visit another village bank It should watch how they conduct their bank meeting and ask the officers questions

How do we know if a village bank is healthy?

At the end of every cycle the village bank should perform a health check The health check involves looking at all of the parts of the village bank and seeing which parts everyone is satisfied with and where there is room for improvement The health check can be simple, involving just a ―yes‖ or ―no‖ answer to a series of questions If the members find weak areas that they want to improve, they can work on those areas during the next cycle Here are the kinds of questions that can tell us if a village bank

is healthy:

Participation

1 The attendance and payment record is kept up to date (Yes or no?)

2 All or almost all of the members attended the last bank meeting

3 Bank members consult and vote on issues important to the bank

4 Members are active in group income-generating activities to raise money for the village bank

3 The village bank has rules about repayment of loans The rules are enforced

4 Members of the management committee abide by the bank’s rules

5 Members are aware of the bank’s rules and the schedule of fines Fines are collected

3 The village bank has a cash book and it is kept up-to-date

4 The village bank is able to calculate loan statistics at the end of every bank meeting

5 The village bank officers are able to calculate dividends at the end of a cycle

6 The village bank officers are able to close one cycle and open the next one within one week

Savings

1 Each member has a plan for mandatory and voluntary savings

2 Each member makes savings deposits at every bank meeting

3 All or almost all of the members deposited savings at the last bank meeting

Loan Repayment

1 All or almost all of the members pay their loan installments on time

2 Fines are imposed on members who make late payments

3 The village bank keeps a debtor’s agreement and a list of personal collateral for each borrower

4 The names of all those who are behind in their payments are read out at the bank meeting

5 During the last cycle the village bank had no loans that were 30 days or more overdue

6 Members who have poor attendance or irregular savings have low priority for receiving loans

7 The management committee follows up immediately on all loans that are

overdue

Growth

1 The village bank has plans to increase its membership to at least 25 or 35

2 During the last cycle the village bank added new members

3 Members are involved in at least two income-generating activities per cycle to raise money for the village bank

Money Handling

1 The village bank has a commercial bank account

2 The commercial bank passbook and deposit slip are shown to the members after every deposit

3 The members know how to check the date and the amount of the commercial bank deposit

4 No one but the treasurer handles the village bank’s money during the bank meeting

5 No village bank transactions are made outside of the meeting except by the management committee

II How Does a Village Bank Operate?

What are the duties of the village bank members?

Any member might be elected as an officer of the village bank So it is important that

all of the members study the Women in Business manuals, understand how the village

bank works, and have a clear idea of what each officer does

In addition to understanding how the village bank works, every woman should try her best to be an active and responsible member This means:

attending the meetings regularly;

having both mandatory and voluntary savings;

paying your loan installments on time;

learning how to read and write and do simple arithmetic;

being able to fill out your own savings passbook and loan passbook;

having a business and working hard to improve the quality of life for your family

Most active bank members belong to solidarity groups These are groups of four to six women who help each other with their businesses Often solidarity groups study the

Women in Business manuals together Sometimes they may even help each other

make loan payments if someone is having a problem Or they can look after each other’s children when someone has to be away Also, each solidarity group plans at least two income-generating activities per cycle to raise money for the village bank All members must agree to abide by the village bank rules That means:

paying fees and fines when they are due;

signing a debtor’s agreement and a personal collateral form before taking a loan;

turning over your personal collateral if you have not fully repaid your loan by the due date

All members are responsible for:

preserving the unity and dignity of the village bank by not gossiping,

backbiting or forming cliques;

inspecting the commercial bank passbook and deposit slip to verify that excess cash was deposited at the commercial bank within 24 hours of the last bank meeting;

helping screen loan applications, so that the village bank’s money is lent out wisely and put to productive use;

taking time from their busy days to help others learn how to read or to

participate in community service projects that the village bank initiates;

keeping the village bank active and growing by recruiting new members who are honest, hard working, and who genuinely want to improve their lives

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

The village bank has four officers: a treasurer, a chairperson, a controller and a

secretary These four make up the bank’s management committee

The management committee

The management committee keeps the bank running smoothly and solves any

problems that come up The officers who make up the management committee make sure the village bank is active and growing They make sure that the group is unified and supportive of every member They know that factions, gossip and prejudice can hurt the bank and that members might lose interest and drift away

The management committee also makes sure that the members are disciplined and do not fall behind in their loan payments Whenever a woman fails to make a loan

payment on time it reduces the village bank’s earnings because that money cannot be lent out to someone else The management committee is careful not to let collection problems develop

The management committee also fills out all of the village bank’s financial records For that reason the officers should all be literate, good at math, trustworthy and

responsible They have to give a lot of time to make the bank successful They have to work hard and set a good example for the others

Each of the village bank officers has special responsibilities:

The treasurer

The treasurer should be someone who is honest, energetic and good with numbers She has the hardest job The treasurer is the only person who handles cash during the bank meeting If any cash is missing, she is personally responsible and must make up the difference from her own pocket The treasurer should be someone who will never

be tempted to borrow personally from the group’s fund

During the bank meeting the treasurer:

counts any money coming into the bank and puts it in a cash separator;

announces to the management committee each transaction that a member is making;

signs each member’s savings passbook;

makes sure each woman taking a loan signs the debtor’s agreement and fills out and signs the personal collateral form;

signs each member’s loan passbook;

fills out the cash control sheet

At the end of the bank meeting the treasurer:

balances the meeting with the controller;

counts the money in the cash box before adding any cash from the bank

meeting;

fills out a commercial bank deposit slip if there is over $10 in the cash box, leaving only $5 in the box;

fills out the cash book with help from the controller;

fills out the financial statement with help from the controller;

fills out the balance sheet with help from the controller;

takes the cash box home with her

On the day after the bank meeting the treasurer:

along with another bank officer, takes any excess cash to the commercial bank for deposit;

if the treasurer cannot go herself she gives the excess cash to two other

officers or trustworthy members who will deposit it in the commercial bank; receives the bank deposit slip with the commercial bank’s stamp and date, showing that the money was deposited

At the end of each 24-week cycle the treasurer:

prepares an end-of-cycle balance sheet, setting aside 10% of the bank’s profit

as a reserve for bank expenses;

calculates each member’s dividend on the basis of her minimum savings during the last 12 weeks of the cycle;

fills out a new savings passbook and new saving journals for each member, adding the member’s dividend to her mandatory savings

The treasurer also keeps all of the bank’s records in order in clearly marked files She keeps the files carefully wrapped in plastic to protect them from water or insects

During the bank meeting the chairperson:

makes announcements and helps the group consult on important matters; helps the group make decisions and rules;

fills out each member’s page of the savings journal and has her sign it

During the bank meeting the controller:

carefully watches each and every transaction;

records the details of each and every transaction on the summary transaction sheet;

reminds members about any fines they owe

At the end of the bank meeting the controller:

balances the meeting with the treasurer;

helps the treasurer fill out the cash book, the financial statement and the

balance sheet;

helps the secretary or the assistant treasurer fill out the loan statistics form

Before the start of each new 24-week cycle the controller works with the secretary to: prepare loan passbooks and loan journals for women taking loans at the start

of the next cycle;

prepare a personal collateral form and a debtor’s agreement for women taking loans at the start of the next cycle

The secretary

The secretary should be someone who is good at reading and writing She receives and writes letters on behalf of the village bank She keeps a record of decisions and rules in her minutes book

During the bank meeting the secretary:

reads out the rules at the beginning of each bank meeting;

takes the roll call at the start of each bank meeting and fills out the attendance and payment record;

keeps a record of decisions and rules in her minutes book;

assists any member to fill out her passbook if the member is having difficulty; prepares a new line on the debtor’s agreement for each woman taking a new loan;

fills out each member’s page of the loan journal and has her sign it

At the end of the bank meeting the secretary:

fills out the loan statistics form with help from the controller

Before the start of each new 24-week cycle the secretary works with the controller to: prepare loan passbooks and loan journals for women taking loans at the start

of the next cycle;

prepare a personal collateral form and a debtor’s agreement for women taking loans at the start of the next cycle

Assistant officers

Assistant officers may also be needed if the banking transactions take a long time An assistant treasurer can fill out the cash control sheet while the treasurer is counting the money and making change Sometimes the village bank chairperson is an older

woman who is well respected but whose eyesight is poor Or perhaps she is weak in math An assistant chairperson can help her fill out the savings journal An assistant secretary can help a member with her savings passbook while the secretary fills out her loan journal and marks the attendance and payment record An assistant controller can keep track of who has to pay a fine at the next meeting

How are the village bank officers elected?

The village bank officers should be elected by secret ballot This is the best way to get the right person for each office The members should not discuss with anyone who they intend to vote for, nor should they try to encourage others to vote for certain people Nothing can do more harm to the unity of the group than to have it divided into factions

Before the election each member should think of the qualities that an officer needs to have Then she should think of each and every one of the group members to see who best exemplifies those qualities She may consider herself to be the best person for an office

The members vote for one officer at a time, starting with the treasurer There are six steps in the election

Step One: At the time of the election the members are all given small pieces of paper

They will use these to write their ballots A lot of ballots are needed for the election,

so some pages of a notebook should be torn into small pieces

Step Two: The members vote for one officer at a time Each member should think of

the qualities that that particular officer will need and who in the group has those qualities She should not discuss her choice with anyone

Step Three: Quietly and in a way that others cannot see, each member writes one

name on a piece of paper She folds the paper and all of the ballots are put in a pile in the middle of the group

Step Four: Two members open up all the ballot papers and put them in different piles

according to whose name is written on the ballot

Step Five: The two members count the ballots The person who receives a majority of

votes is elected to that office A majority means more than half So in a group of 25 a woman must receive 13 votes to be elected

Step Six: If no one receives a majority, then the members vote again between the top

two candidates As before, voting is done in an atmosphere of quiet reflection

Officers serve in their positions for one year After two cycles the group should elect new officers The current officers may be elected to a new post, but are not eligible to serve again in the same post This gives everyone a chance to learn how to manage the village bank

How do the officers get trained?

The duties of the officers are described in detail in the Women in Business manuals

But it is very helpful if an officer from a more experienced village bank gives the management committee some hands-on training on how to conduct a bank meeting The best way is for the new officers to role-play a banking day and get useful

feedback and pointers from the experienced officer A new village bank may even want to pay someone to come and train them

Another way for a new management committee to get trained is to visit a more

experienced village bank and watch how those women conduct their banking day After all the transactions are completed the new officers can ask detailed questions

about things they did not understand in the Women in Business manuals

Once a village bank has trained and experienced officers, it is useful if the group elects the next set of officers half way through the second cycle Then the new

officers can sit beside the current officers and assist them, at the same time learning all the different responsibilities that go with that office It is especially important that the new officers learn how to open and close a bank cycle

What is a village bank cycle?

A cycle is a period of time when certain things happen It’s like planting rice First you grow the seedlings, then you prepare the land and transplant the seedlings During the growing season you pull out the weeds Finally it is time for the harvest Every year you go through the same steps, from planting to harvest The village bank also operates in cycles

Each cycle is six months long, which is 24 weeks At the beginning of the cycle every member gets a new savings passbook Other accounting forms are also started then

At the beginning of the cycle many loans are given out to the members But if the loan fund is still small, it may not be possible for every member to get a loan at the

beginning

After one week the members start bringing their loan installments along with their savings Every week, as money comes into the bank, new loans are given out Loans given out at the beginning of the cycle can be for as long as 24 weeks But loans given out later are for shorter periods of time, like 20 weeks, 16 weeks, 12 weeks, 8 weeks,

or even 4 weeks This is because all loans must be paid back by the end of the cycle

Here are some of the important things that happen during the village bank cycle:

The beginning meeting of the cycle is called the ―Zero‖ Meeting This is when the first loans of the cycle are given out

At the end of the first week the first installments on those loans are due That bank meeting is called Meeting 1 It means one full week of the cycle is

complete

Starting with Meeting 1, as savings and loan payments come into the bank, additional loans are given to members who did not get them at the ―Zero‖ Meeting

At Meetings 2 through 19 all of the bank members get loans and those who have paid their loans back get repeat loans

At Meeting 20 the last four-week loans of the cycle are given out The

management committee also arranges to get all the accounting forms it needs for the next cycle

From Meeting 21 the management committee begins reminding the members

to get their loans repaid on time because the end of the cycle is coming up During Meeting 22 the women discuss who wants a loan for the next cycle and how big a loan each person wants The demand for loans may be bigger than the money in the group fund

The management committee reviews all the loan requests At Meeting 23 the list of loans to be given out at the beginning of the next cycle is finalized Other women will have to wait a week or two until the group fund starts to fill

up again with loan installments and more savings

Meeting 24 marks the end of the cycle At that meeting all loans are repaid and the cycle is closed

Who screens the loan applications?

The village bank members themselves screen loan applications They are the

managers and it is their money that is being lent out They want to be sure they will get it back

When screening loan applications the members want to be sure the borrower is

trustworthy and will repay her loan on time They will look at her past repayment record, her attendance and whether or not she saves regularly

What about the woman’s business? The members will want to be sure the borrower is not going to pass her loan on to somebody else Does she have a business already, or

at least does she have a good business idea? Does she have experience with the

business she plans to do? Is she going to use her loan for production and not

consumption? What is she going to buy with the loan? What does she plan to sell? Where? Who are her customers?

And what about her savings? Is the loan she is requesting not more than five times her savings? Is her collateral worth as much as the loan?

The whole group may be involved in screening loans, or it may be done by the

members of a solidarity group, or by the management committee Once a woman has borrowed several times and her business is well known, screening becomes routine

What about larger and longer loans?

After the village bank has closed two 24-week cycles successfully, it can start offering cross-cycle loans to women who are active bank members and who have a good record of making payments on time Cross-cycle loans can be for more than 24 weeks and they can be given out at any time during the cycle A woman who has a cross-cycle loan will get her share of the dividends so long as her payments are up-to-date at

Meeting 24, when the cycle is closed These longer and larger loans may be for as much as $100 or $150 if the group fund has grown sufficiently

But before a village bank gives out longer and larger loans it needs to make sure that all the members who want shorter and smaller loans get their loans first

A member who has a cross-cycle loan can get a dividend at the end of the cycle if her loan payments are up-to-date If she has arrears she may have to use her savings to make the payments But that will reduce her dividends

A woman taking a larger loan will have to sign a new personal collateral agreement, promising to hand over to the bank something that is worth at least as much as the new loan in the event she fails to pay it back She also needs to sign a new debtor’s agreement

Even if a woman gets a larger and longer loan, her loan should not be more than five times her savings And a woman with a cross-cycle loan may not get another loan until her first loan is paid off

Why do some women have trouble repaying their loans?

If a woman passes her loan on to someone else she may have trouble making her payments If she is not in control of the business, she will be stuck making the

payments while someone else is using her money This is why the village bank should make sure that every borrower has a business and is the owner and manager of her business If a woman is just getting started she should be given fairly small loans until her business gets going

As for women who take loans for their businesses, there are three main reasons why they might fall behind in their payments: misfortune, lack of technical know-how, and bad character

Misfortune

Sometimes people have bad luck A flood or fire could ruin a woman’s business, or she could get sick In such cases, the village bank will try to help the member get back

on her feet The members of her solidarity group might help her make her loan

payments The bank members might do an income-generating activity to help her get her business going again The management committee might give her more time to repay her loan without having to pay a fine This is called ―rescheduling a loan.‖

If a woman is honest, saves regularly and is an active bank member, the management committee may consider giving her a new loan to pay back her first loan and to get her business going again This is called ―refinancing a loan.‖

Lack of technical know-how

Sometimes a woman may start a business she does not know very much about Or she starts in a big way before she has learned how to do the business properly Perhaps she ordered a lot of materials and they got spoiled Perhaps she invested in livestock and the animals died Perhaps no one knows how to repair the tools she needs to do her work, or the spare parts are not available locally Perhaps she does not know how

to find customers or cannot produce as good quality as others who have more

experience Perhaps she used part of her loan for household consumption and now she can’t make the payments

Most of these are technical problems that people might face when they start a new business In some cases people just make bad decisions That is why it is important to begin with something you know how to do and to start small and grow gradually

Women who make bad decisions usually have to pay a fine for missing their loan payments In some cases, if her business idea is basically good, the management committee might decide to reschedule her loan But it is unlikely that the village bank would want to refinance such a loan It is not a good idea to throw good money after bad!

How does the management committee solve collection problems?

All the members of the village bank should be committed to making their loan

payments on time The management committee has to watch carefully to make sure people do not fall behind in their loan installments

There are two ways a loan can be overdue One way is when a borrower falls behind

in her weekly loan payments The other way is when the loan has not been repaid by the due date—the date when the loan was supposed to be repaid in full

One of the jobs of the management committee is to encourage people who are behind

in their loan installments to get back on a payment schedule It is always better to take action before the borrower falls too far behind If a borrower has missed two

payments the management committee should meet with her to find out what the problem is It is unhealthy for the borrower and for the village bank to let debt

accumulate

Village banks have strict rules to deal with people who are careless about repaying their loans on time At the start of every bank meeting they announce the names of any members who have missed one or more payments Most village banks also

impose a fine for missing a loan installment—$.05 if a payment is missed once, and

$.10 for each meeting it is missed after that If a borrower is consistently late making her payments she will have low priority when it comes to getting her next loan She may have to wait until others have taken their loans or she may get a smaller loan

If no payment has been made on a loan for 30 days, the loan is said to be in ―default.‖

In such cases, or if the loan has not been fully repaid by the due date, the village bank may ask the borrower to use her mandatory and voluntary savings to cancel as much

of the loan as possible In most cases there will be enough savings to complete the payments But if money is still owed, the borrower should hand her personal collateral over to the bank

If no payment has been made on a loan for 90 days the loan is said to be ―bad debt.‖

In such cases the village bank may have to sell the borrower’s personal collateral to make the loan payments

What does it mean to reschedule a loan?

Rescheduling a loan means giving a borrower more time to pay, usually because of some setback or misfortune that was not her fault Usually when a loan is rescheduled the borrower does not have to pay a fine But she does have to pay interest on the unpaid balance for the extra weeks she is given

Before a loan is rescheduled the borrower signs a new debtor’s agreement Also the village bank collects her personal collateral and holds it until the loan is paid off

What does it mean to refinance a loan?

Refinancing means giving more money to a borrower who still has an outstanding loan This is mainly done in the case of a woman who is honest and hard working, but who is facing difficulties because of some misfortune that was not her fault For example, a woman’s business might suffer because of fire, flood or illness The new loan will enable her to pay off her old loan and get her business back on its feet Since a borrower cannot have two loans from the village bank at the same time, the first thing the woman must do with her new loan is pay off the balance of her first loan Then with the rest of the money she can get her business going again

How can a village bank increase the dividends it pays?

For a village bank to give dividends it must have a surplus or a profit There are two ways to build up a surplus One way is to increase earnings The other way is to reduce costs

Increasing earnings

To increase earnings, the group fund should be lent out all the time Interest on loans

is the main source of income for the village bank The group’s money should never sit idle It should always be rotating That is why, after successfully closing two cycles, many village banks start giving cross-cycle loans These are loans that do not have to

be paid back by the end of the cycle Women who are in good standing, who have at least three loans and paid them back on time, are eligible for cross-cycle loans

The village bank also earns money from fees and fines It is important that fees and fines be collected

Another way to increase the village bank’s earnings is to bring in new members This will increase the size of the fund and add new borrowers to keep the fund rotating Earnings can also be increased if all the solidarity groups do income-generating activities to raise money for the village bank

Reducing costs

To reduce costs the village bank has to be properly managed

First of all, it is important that all of the village bank members be disciplined and not fall behind in their loan payments Whenever a member fails to make her loan

payment it costs the bank money because that money cannot be lent out to someone else The management committee must not let collection problems develop

Secondly, the management committee has to solve any organizational problems that might lead to disunity or cause members to become apathetic or even leave the group The village bank must be unified and supportive of every member

How do group income-generating activities work?

A group of four to six members, who are friends or neighbors, can form a solidarity group In some village banks all of the members are divided up into five or six

solidarity groups Each cycle these groups carry out one or two income-generating activities for the village bank

Usually the solidarity groups carry out short-term activities They do not have to be very complex or very expensive to run Most group income-generating activities can

be organized in a week or two and can be done in one day

Solidarity groups can prepare snacks to sell at a fair or a sporting event They can vaccinate animals or put on a cultural show Some solidarity groups plant a garden or fatten an animal for the village bank There was one solidarity group that organized a raffle of goats and chickens and earned $400 for the bank!

Usually the solidarity group borrows money from the village bank to carry out its project When the project is finished the members return the advance plus the earnings

to the village bank The women who contribute their time to the project do not take any salary for their work This is their volunteer service

But in many village banks half of the profit goes to the village bank, which advanced the money, and half goes to the members who did the work The members’ share is added to their mandatory savings Not only are their savings increased, but their dividends are also bigger because of these group projects Members of the solidarity group who did not contribute to the project, however, do not get a share of the profit

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

As for venue:

A village bank can operate just about anywhere—on someone’s porch, in someone’s front yard, or in any room where 25-35 women can gather comfortably and walk back and forth to their homes The management committee needs to be able to sit in a place

at the front of the room that is not too crowded During the bank meeting each

member, in turn, comes to the front and gives her money to the treasurer who

announces the member’s transactions Money and passbooks should not be passed to the front by other members or tossed at the treasurer from a few rows back in the group!

As for equipment:

Every village bank needs a calculator to

balance the meeting, figure out loan equations

and calculate dividends With a calculator it is

easy to do arithmetic and you won’t make

mistakes

Every village bank needs a cash box with three

locks Different officers should keep the keys to the cash box The treasurer keeps the cash box In some village banks the other three officers have the keys Some cash boxes are actually small tin trunks that are big enough to hold all of the village bank’s accounting forms and files

It is easier for the treasurer to make change and keep track of the money if she has a cash separator A cash separator is a box with sections so the different notes do not get mixed up There are places for each of the different

denominations of notes

As for supplies:

All of the officers need good

ballpoint pens

The secretary needs a minutes

book where she can write down

the decisions and rules that are made during the bank meeting

A stapler is useful for keeping forms together that go together

The officers need about 7 file folders for keeping all of the different records, journals and forms

A plastic bag or a piece of plastic is helpful for protecting the forms from insects and dampness

A hole punch may be useful for binding pages together in the file folders

Some rubber bands and paper clips may be useful for holding money and papers together

Every cycle the village bank needs all of the accounting forms for the full 24 weeks These forms will have to be purchased or they can be photocopied or drawn by hand

A group of 30 women would need the following forms:

Attendance and payment record—2 per cycle

Savings passbooks—1 per member and 5 extras for new members

Savings journal pages—same number as savings passbooks

Loan passbooks—3 per member and 10 extras for new members

Loan journal pages—same number as loan passbooks

Treasurer’s cash control sheet—2 per cycle

Controller’s summary transaction sheet—28 per cycle (This includes a sheet for

the ―Zero‖ Meeting and three extras for between-cycle meetings.)

Cash book—about 10 pages

Financial statement and balance sheet—28 per cycle (This includes a sheet for

the ―Zero‖ Meeting and three extras for between-cycle meetings.)

Loan statistics form—1 per cycle

Debtor’s agreement—2 per cycle

Description of personal collateral—2 per cycle

The savings passbooks and loan passbooks are kept by the individual members The attendance and payment record, the treasurer’s cash control sheet, and the loan

statistics form can be kept together in one file The debtor’s agreement and the

personal collateral form can be kept together in another file But the savings journals, the loan journals, the summary transaction sheets, the cash book pages and the

financial statements should all be kept in their own separate files In some village banks the forms are kept in four files, depending on which management committee officer is responsible for each form

What happens at the bank meeting?

Bank meetings are held once a week After three or four cycles, once the members

have studied the Women in Business manuals and have a clear understanding of how

the village bank works, and as their microenterprises begin to grow and take up more

of their time, the members may decide to have bank meetings every other week If the members decide to meet every second week, the mandatory savings rate will double Instead of weekly loan payments there will be biweekly payments The interest rate

on loans will remain the same

Before the bank meeting

If loans are to be given out at the bank meeting, and if cash has to be brought from the commercial bank, the treasurer and another officer, or two trustworthy members, must

go to the commercial bank the day of the bank meeting and withdraw the money To

do this the treasurer must prepare a check or withdrawal slip

Even before the bank meeting begins the members of the management committee may want to meet for half an hour or so to discuss any issues they need to resolve in order

to keep the village bank healthy

During the bank meeting

Bank meetings start on time Women have busy schedules and it is not fair for those who arrive on time to have to wait for latecomers If anyone is more than 15 minutes late to the bank meeting she should pay a fine

At the start of the meeting the secretary reviews the village bank rules and reads the roll call On the attendance and payment record she marks a ―P‖ next to the name of every member who is present Later she will mark an ―L‖ next to the names of

members who come more than 15 minutes late At the end of the meeting she will mark an ―A‖ next to the names of members who were absent

If a deposit was made in the commercial bank the previous week, the treasurer will pass the commercial bank passbook and the stamped and dated deposit slip to the members so they can verify that the money was deposited within 24 hours of the last bank meeting

The chairperson makes any announcements or brings up matters that need to be

discussed Then there is time for general consultation, when any member of the bank can share news or bring up an issue for the group to consider The chairperson

facilitates the consultation, making sure that it does not drag on too long, but also giving everyone a chance to speak She helps the group come to a decision if that is required

After the consultation the transactions begin The four officers who make up the management committee sit together at the front of the group The controller sits to one side where she can keep her eye on all of the transactions All village bank

transactions are done at the bank meeting, in front of the whole group

If any women have completed a group income-generating activity during the week, they hand the earnings from the activity over to the treasurer at the start After that, the members come, one by one, to the front to do their transactions

In some village banks the first women to arrive for the meeting get to do their transactions first But if some members have handed over earnings from a group income-generating activity, they might go first This will make it easy for the treasurer to enter the members’ share of the profit in all the various forms and journals

At the ―Zero‖ Meeting, when the bank is giving out the first loans of a new cycle, loans may be distributed before savings are collected At all other bank meetings loans are given out after all the savings and loan payments have been collected

As each woman comes to the front she hands the treasurer her savings

passbook and loan passbook and announces her transactions The treasurer repeats each one so that the other officers can hear

Normal transactions include payment of mandatory savings, payment or

withdrawal of voluntary savings, payment of fines or fees, payment of loan installments, and payment of arrears If a member has trouble filling out any of her forms, she may ask the secretary to help her

Only the treasurer handles cash during the bank meeting She also signs each member’s savings passbook and loan passbook

The members verify and sign the savings journal (which is filled out by the chairperson) and the loan journal (which is filled out by the secretary)

During the transactions the treasurer fills out a cash control sheet on which she writes the net amount of each member’s transactions

The controller writes down the details of each and every transaction on her summary transaction sheet

After each member makes her savings payment, the secretary puts a check next to her name on the attendance and payment record

At most bank meetings, after all the money has been collected, the

management committee is able to make one or more new loans The women receiving loans come to the front, one at a time, and sign the debtor’s

agreement They also fill out and sign the personal collateral form if they have not already done so Along with their initial disbursement they receive a new loan passbook They must also sign a new page in the loan journal

If one or more of the solidarity groups proposes to do an income-generating activity to raise money for the village bank, and if the group requires some cash from the bank, this can be given at the end of the transactions One of the members of the solidarity group signs a receipt for the money

After the bank meeting

At the end of the bank meeting the members may go home, but the management committee must stay to balance the meeting and complete the forms

First the treasurer and the controller add up the totals on the cash control sheet and the summary transaction sheet and ―balance‖ the meeting by checking to see if their sums are the same If their figures do not agree, they must go back, member by member, and find where they made a mistake

Once the treasurer and the controller agree on the amount of money that came into the bank during the meeting, they count the cash in the cash separator The officers open the cash box with three locks and the treasurer counts the cash inside to make sure that the amount is the same as shown on last week’s balance sheet Then she places the cash from that day’s bank meeting in the cash box and the box is closed

Using the figures on the summary transaction sheet, and with the assistance of the other committee members, the treasurer fills out the cash book and the financial statement

If there is over $10 in cash, the treasurer prepares a deposit slip for the

commercial bank for all of the excess cash beyond $5 Only $5 will be left in the cash box The cash to be deposited is counted out and tied together with the commercial bank deposit slip, using a rubber band

Starting with the previous week’s balance sheet, the treasurer uses the figures

on today’s financial statement to prepare a new balance sheet

Between bank meetings

Between bank meetings the treasurer keeps the cash box and the village bank’s

financial records If excess cash is to be deposited in the commercial bank, this should

be done within 24 hours of the bank meeting Two officers or two members should

take the money to the bank and on the same day return the deposit slip, stamped and dated, to the treasurer

III The Village Bank Accounting System

How does the village bank accounting system work?

There are eleven forms that make up the village bank accounting system These forms all provide important pieces of information that give a clear picture of where the

bank’s money is and how well the bank is doing

The different parts of the accounting system form a building, like a house At the

foundation of the house are the forms that record each member’s attendance and how much she has saved or borrowed Another set of forms brings all of the individual and group transactions together These are like the walls of the house Finally there are two forms that summarize all of the information The financial statement and the

balance sheet are like the roof of the house They give an overall picture of how the village bank stands at any given moment

There are three other important forms that are not strictly part of the accounting

system The debtor’s agreement and the description of personal collateral protect

the group’s money in the event a borrower cannot repay her loan While the balance

sheet tells how the village bank is doing at a particular moment, the loan statistics

form shows how the bank is doing over time Is it improving or is it slipping into bad

habits?

The following section describes each of the eleven accounting forms and the three additional forms, and explains who fills them out and how to fill them out

Attendance and payment record

The attendance and payment record lists the names of all of the members of the

village bank It is filled out by the secretary There are two columns for each bank meeting—one column for attendance and one for payment of mandatory savings At the top of each column the secretary writes the date of the meeting In the attendance column she writes ―P‖ for present, ―A‖ for absent, or ―L‖ for late In the payment column she puts a check mark next to a member’s name if she brings or sends her mandatory savings Otherwise she leaves the space blank

At the end of each meeting the controller should make a list of the members who owe fines She should make sure that the fines are paid at the next bank meeting

At the end of the cycle the secretary can add up the total number of meetings a

member was present and the number of times she deposited her mandatory savings Women who attend and save regularly may be given preference for bigger and longer loans

The attendance and payment record should be put in a file and kept by the treasurer along with the other financial records

[Include copy of partially filled out attendance and payment record here.]

Savings passbook

Each member of the village bank has a savings passbook, where savings deposits and withdrawals are recorded Women should be able to fill out their own passbooks, but

if they have trouble, they may ask the village bank secretary for help Once the figures

in the passbook have been verified and the money has been deposited or withdrawn, the passbook must be signed by the treasurer

Members get a new savings passbook at the time they join the village bank, and after that, at the ―Zero‖ Meeting of each new cycle The front of the savings passbook has places for the name of the village bank, the member’s name, the mandatory savings rate and the starting date of the cycle

On the first line of the passbook there is a box to write the year Then in the shaded boxes, next to the words ―Opening Balance,‖ the treasurer writes the ending balance from the member’s previous savings passbook for mandatory savings, voluntary savings, and total savings If it is a new member and she has no savings, the treasurer writes 0 (zero) in each of these boxes The treasurer also signs the box at the end of the row to show she has checked the figures and approved them

The rest of the passbook has lines to show new savings deposits or withdrawals and current totals Any money deposited or withdrawn should be written in the white boxes The shaded boxes are for new totals At the left there is a box to show the date

of the transaction At the right there is a box for the treasurer to sign once she has verified the transaction and the totals

On the second line, in the date box, the treasurer should write the date that the last cycle was closed (the date on the end-of-cycle balance sheet) and the word

―dividend.‖ Then she writes the amount of dividend the member earned in the box for Mandatory Savings and again in the box for Total Savings In the box for Voluntary Savings she writes a zero, because dividends are only added to mandatory savings The previous balance and the dividend are then added and the new totals are written

in the shaded boxes After entering the figures the treasurer signs the box at the right Starting with the ―Zero‖ Meeting the member should fill in the date and the amount of mandatory savings, voluntary savings and total savings she is depositing at each bank meeting She should also find the new balances and write them in the shaded boxes The balances can be checked by adding horizontally and vertically The treasurer will verify these sums at the bank meeting

In the event that a member wants to withdraw savings, the amount to be withdrawn should be written in brackets ( ) When adding a series of numbers, one way to

indicate that a number should be subtracted is to write it in brackets

[Include copy of partially filled out savings passbook here.]

Savings journal

The savings journal is similar to the savings passbook It is the village bank’s record

of each member’s savings The savings journal has a separate page for each member

of the village bank The chairperson prepares a new page of the savings journal when

a member joins the village bank After that, a new page is prepared for each member

at the beginning of every cycle The savings journal is filled out during the bank meeting by the chairperson or her assistant

The amounts and totals shown in the savings journal should correspond exactly to what is written in the member’s passbook Once the treasurer has signed the

passbook, the member should check the savings journal to verify that the figures written there are the same as those in her passbook If the figures are correct, the member should sign the savings journal in the space provided

All of the savings journal pages should be put together in a file and kept by the

treasurer along with the other financial records

[Include copy of partially filled out savings journal here.]

Loan passbook

A new loan passbook is prepared by the treasurer for every loan given out by the village bank The loan passbook is given to the borrower at the time the loan is given

It is kept by the borrower

On the front of the loan passbook there is a place for the member’s name and the name of the village bank There are also places to write the amount of the loan (the principal), the interest and the total amount the member has to pay (principal plus interest) There are also places to write the term of the loan (how many weeks it is for), the number of installments, and the initial disbursement (The initial

disbursement is the amount of the loan less the interest, which is taken out at the beginning.) Finally the front of the loan passbook shows how much the member’s weekly loan installment is, what her weekly mandatory savings payment is and how much money she needs to bring to each bank meeting In addition to this amount, she may also bring as much voluntary savings as she likes All this information is filled out by the treasurer

On the inside of the passbook there is a place for the date of the loan and a box to write the year In the shaded box, next to the words ―Amount of Loan,‖ the treasurer should write the amount of the loan principal and she should sign in the box on the right Women should be able to fill out the remaining parts of their loan passbooks themselves, recording the amount of each loan payment and the balance remaining But if a member has trouble, she may ask the village bank secretary for help Once the figures in the loan passbook are verified and the loan payment is made, the treasurer should sign the passbook

At the next bank meeting the member should write the date of the meeting, and in the white space between the brackets ( ), she should write the amount of her loan

installment The brackets mean the installment is to be subtracted from the previous loan balance The member should subtract the amount of the installment and write her new loan balance in the shaded box

At the bank meeting the member will hand her loan passbook and her money to the treasurer The treasurer will count the money and check the member’s calculations If they are correct she will sign the loan passbook

[Include copy of partially filled out loan passbook here.]