The process

• Groups of people benefit from business training, mentoring and small business loans to fund their small business ventures. Each group is called a community bank.
• Most community bank members are women. They provide peer guarantee for one other but no physical collateral. Group members build trust and support one another.
• Loans are taken out for periods up to one year. Loan sizes increase over each loan cycle, as businesses become fully sustainable.
• Interest is charged at close to the local bank rate. This is far lower than local moneylenders’ rates, which are often crippling and prohibitive.

Interest on loans

VisionFund clients pay interest on loans each month as part of a strategy to move people from an aid to developmental mentality. A solid business model encourages responsibility, accountability and ownership. People take control of their businesses and their lives.

Loan sizes and interest rates depend on the local economy.
A reasonable interest rate is charged for three reasons:

• To cover the cost of running a microfinance programme.
• To help people become financially independent and competitive under normal market conditions.
• To avoid destabilising the local economy and distorting the development of the microfinance sector in country.