LUSAKA, Nov. 30 (Xinhua) -- Villagers in rural and low-income communities in Zambia now can get financial support from "village banks" to start or expand their own businesses.
Village banks, or community banks, are informal mutual-support groups that have existed for years in developing countries, which offer financial help to people who have no access to the services of formal banks.
With money gathered from 10 to 20 community members as the capital pool, village banks will provide loans to people with viable business ideas.
The interest and profits from the loans will be reinvested by the banks or shared among the members.
"I managed to start a small business of selling refreshments with the money from a village banking program. I now intend to get a loan to expand my business to include groceries," said 30-year-old Sandra Bwembya, a member of JAM City village banking initiative in Lusaka, the capital of Zambia.
Bwembya, a mother of two, said that she joined the group about a year ago with the aim of transforming her financial situation.
Group members also contribute money to a special fund for emergencies, a social fund in a sense, which will be given to a member in case of emergencies such as the death of a loved one and hospitalization.
The fund serves as a cushion against misfortune and enables the group members to carry on with their lives.
Victoria Kapya, coordinator of JAM City village banking initiative, said that the success of this banking model lies in the fact that it is run by community members, thereby encouraging community ownership.
She said the success of village banking indicates that there is great demand for bank services among individuals, who are turned off by the complicated processes of formal banks.
The village banking model is both simple and practical, a reason why the model is embraced by many, particularly those with low incomes, said Kapya.
"We have seen a number of households and communities being uplifted from poverty with the help of village banking initiatives," said Kapya.
Bankers Association of Zambia has also praised village banks for their role in helping reduce poverty by cultivating a culture of saving and investing among the Zambian population.