Borrower Profile: New Jerusalem Community Bank

pictured above are 10 of the 12 members of the New Jerusalem Community Bank in Las Canoas, Nicaragua, with WCCN staff and study tour participants.

In January 2010, WCCN staff and study tour participants learned firsthand about microfinance solidarity group lending by attending a New Jerusalem Community Bank business meeting. The bank was formed by longtime WCCN partner agency Prestanic, which has received loans totaling $7 million from WCCN over the past 19 years.

Community banks are a form of solidarity lending designed to provide microcredit and savings opportunities to the poorest of the poor, primarily women. Neighbors and family members comprise financial support groups of 12 to 26 members called “community banks.” Individuals borrow and save money, with the group guaranteeing each other’s loans since individual members lack collateral.

The New Jerusalem Community Bank membership consists of small business owners who sell hats, cosmetics, clothing, CDs, movies or construction materials, either door to door or from their homes. All had needed small loans to expand and build inventory but none could secure conventional bank loans. Then they heard of Prestanic’s community bank program and formed their own bank.

Prestanic helped them select members of their community bank and provided training on how to evaluate loan applications, disburse loans, collect loan payments, track principal and interest payments, and solve conflicts. Prestanic provides loan funds, and one community bank member delivers the group’s loan payments to Prestanic.

New Jerusalem Community Bank members each have borrowed $75 for a four-month term. Repayment makes them eligible for a second loan. Each time they repay one loan, they become eligible for a slightly larger loan and for longer terms.

While primarily motivated to join a community bank for access to credit, members also receive support and encouragement from others in the same situation to help grow their business.

Prestanic started forming community banks in 2009 to empower women to start their own business, earn money and improve their quality of life. While Prestanic’s community banks memberships can include men, 80 percent of members must be women, which provides leadership opportunities for the women. Prestanic now has 64 community banks serving 1,000 women and has set a target goal of 10,000 women as members of community banks in two years -- owning their own businesses and having significant and meaningful work.