Yes. In addition to providing loans and donations, you can also offer your time and expertise to the villages or to help run Village Invest. If you have skills that you can share please get in touch.
None. In fact the Federation, the village organizations and the Savings groups all receive a processing fee from Village Invest, to cover the costs they incur for bookkeeping and for monitoring of loan uses and repayments.
We charge a service fee to our lenders. At present, this fee amounts to 5%, but we hope to be able to reduce it, as we scale up our operations. This is our only source of income, used to cover all our costs. If the lenders manage to earn an interest on their loans, this will always be net of service fees and all other fees (including money transfer frees).
Reducing the level of indebtedness is at the core of what we are doing. We pay extra attention to make sure that this does not happen. We feel strongly that unless a family manages to break free from past debts, it will be really hard for its members to break free from poverty. Most such families decide to get a loan through Village Invest to refinance high-paying debts with local loan sharks. This is like a breath of fresh air for them! Moreover, the baseline we collect from each household includes data about debt exposure and household Debt Ratio, that we carefully monitor to evaluate the impact of our model. To this end, we have also designed a product that specifically aims to reduce indebtedness.
Loan and interest repayments are collected monthly by the Small Savings Groups to which the borrowers belong to, then forwarded to their village-level savings and credit organization, to be finally collected by the Federation of village savings and credit organizations at inter-village level. This collection system ensures multiple layers of checks and controls.
When a repayment is missing, the relevant Small Savings Group investigates the reasons behind it and informs the village organization of the same. If the delay persists, village representatives will visit the person and conducts further investigations. If the problem still persists, and unless it is due to an emergency or other unforeseen circumstances, Federation leaders will intervene and, in case of frauds or other intentional cases of defaults, they will refer the case to the local police. Loans are generally not written off unless there is a case of fraud.
In case of emergencies or genuine inability to repay due to unexpected events, the village organization will use its Security Fund to compensate for the defaults. As last esort, the Federation will mobilize its own savings.
Borrowers repay their loans monthly to the Small Savings Groups to which they belong. Within 24 hours, the Small Savings Group leaders will forward the payments to the village-level organization, which will at that same meeting re-lend the total repayment amounts to the “next borrower in line”. This is repeated every month.
The same happens with interest payments. However, the village-level organization will forward them to the Federation, which will aggregate them from all villages and deposit them monthly into our local Village Invest bank account, to be transferred into your own Village Invest account!
The beauty of this model is that it all allows for payment delays to be immediately reported and investigated. Moreover, all transactions take place publicly, for all to see. In fact, when we rate the communities, we also look at how publicly these transactions were and the quality of the records, bookkeeping and meeting minutes.
Your loan will be aggregated with other loans targeting the same village. As soon the funding request is met, or one month has elapsed, we will disburse the total collected loan amount to the Federation of village-level savings and credit organizations [this is an Indian legal requirement. In other countries, we may be able to transfer loans directly to the end borrowers]. Within 24 hours, the Federation will transfer 100% of the loans directly to each individual member’s bank account, as per the agreed livelihood plans. If they have no bank accounts, we assist them in opening one, while allowing the Federation to use checks instead.
Each household prepares a financial and business plan, which are then aggregated at village level. These form the basis of their loan request to you. When we rate the communities, we also assess the quality of these plans and verify how they were prepared.
100% of your loan goes directly to the end-borrowers. There are no financial intermediaries along the value chain.
Village Invest does not guarantee your loans or promise that there will be a financial return. We do our best to screen borrowers and villages so that we only include those that are most likely to repay back your loans in a timely manner. We have also introduced incentives to encourage best performance. For instance, village organizations that achieve A+ scores for three consecutive years, will become shareholders of Village Invest! Moreover, the better their performance, the higher the loan amount they will attract – and the higher the income they will derive from their processing fee (calculated as a percentage of the total amount administered by them). Finally, village organizations put aside some funds (called Security/Safeguard Fund) to compensate for defaults. And last but not least, we are developing an effective web-based monitoring system that immediately alerts us when there is a delay in repayment, so that we can promptly intervene and investigate the causes behind the delay.