Monday, November 24, 2008

About Trust Banks

A friend was asking how trust banks work, and what the AU$10,000 is for, so I'm sharing some information from Opportunity International Australia. What impresses me about the trust bank program is the structured coordination and training that complements the business loans to a group of 15 - 30 women, to enable "the transformation of the whole person, and includes training in business and management skills, social/community issues (eg health, sanitation and community participation), and personal development (eg motivation, selfesteem and leadership)"
A former manager of mine went to India last year and saw the projects that Opportunity International undertakes, and she continues to promote their great work today.

Trust Bank clients. Image Courtesy of Opportunity International

The six step Trust Bank process (also available with more detail in PDF format)

Step 1: Opportunity International’s Implementing Partner undertakes a feasibility study in a community to see if it has the potential for a Trust Bank program. Half the residents must be living below the national poverty line (typically US$1-2 a day). There should bean existing informal market and access to a local bank, communication facilities and transport.
Step 2: The loan officer consults with local leaders and sources potential clients, inviting them to an informal information meeting. During the meeting the loan officer outlines the Trust Bank program and answers any questions. Interested clients register to form a group.
Step 3: Each registered client is carefully screened for their suitability to the program. The loan officer visits their place of business and explains the conditions of Trust Bank membership.
Step 4: The clients are asked to attend orientation training over a number of sessions to receive details on the microfinance program, create internal procedures, identify leaders and develop group solidarity. With the assistance of the loan officer, each member develops a loan application and devises a basic business plan and loan use strategy.
Step 5: Leaders of the Trust Bank make a recommendation to the group members concerning the make-up of the group.The Trust Bank is officially formed when the group members endorse the recommendation. Members must know and trust one another because they must agree to co-guarantee each other’s loan repayments. They do not want to accept someone into the group who is dishonest or unreliable because this would adversely affect the whole group.
Step 6: Loan applications are assessed and approved by the Trust Bank program manager. The loan officer records and monitors loan repayments at weekly Trust Bank meetings.

Opportunity International worldwide*:
• Makes 85% of loans to women
• Achieves a loan repayment rate of 98%
• Works in 27 developing countries worldwide
• As of December 2006, supported over 960,829 active clients
• Provides effective HIV/AIDS education in several African
• Is creating and sustaining almost two million jobs
• Is providing long-term solutions to tsunami-ravaged parts of
India and Indonesia
*Data current as at December 2006