VICOBA

Village Community Banks

Village Community Banks (VICOBA) represent a grassroots financial solution that has transformed how communities in East Africa save, borrow, and invest together. These self-managed savings groups embody the principles of mutual trust, collective responsibility, and community empowerment. Born from the need to provide financial services in areas where traditional banking is either absent or inaccessible, VICOBAs have evolved into robust microfinance institutions that combine traditional African communal values with modern financial management principles. Understanding how these groups traditionally operate is crucial to appreciating how Hesafin's digital solution enhances and streamlines their processes while maintaining the core community values that make them successful.

Group Formation and Structure:

• Members form groups of 15-30 people from the same community who trust each other

• They elect a council including a leader, secretary, and treasurer

Savings Process:

• Members meet weekly or bi-weekly at an agreed time

• Each member contributes a fixed amount of savings (shares) at each meeting

• The money is kept in a secure box with multiple locks, with different members holding different keys

Lending Mechanism:

• Members can borrow up to 3 times their savings amount

• Loans are given with interest (typically 5-10%)

• The interest earned is shared among members as profit

Social/Insurance Fund:

• Members also contribute to a separate social/insurance fund

• This fund helps members during emergencies

• It's usually given as a grant, not a loan

Annual Cycle:

• Groups operate in cycles of about 12 months

• At the end of the cycle, all savings and profits are distributed to members

Benefits:

• Provides access to savings and credit for people without bank accounts

• Builds strong community bonds and social support

• Teaches financial management skills

• Helps members start or expand small businesses

• More flexible than traditional banking