VisionFund's Loan Methodologies

VisionFund Cambodia implements three credit methodologies:

1. Community bank methodology

Designed to provide financial services for the poorest micro entrepreneurs, build civil society and strengthen community participation.  A community bank is composed of 20-80 members (with 5-20 peer groups).  Loans are given to individual clients and guaranteed by the peer group and the whole community bank.

• Loan Size:  <US$250
• Term:  Up to 12 months

2. Solidarity group

Designed to meet greater customer satisfaction, maintain high retention rates and provide the needed portfolio growth for institutional sustainability.  A solidarity group is composed of 3-5 individual borrowers.  These borrowers require equity to support an increase in loan size.

• Loan Size:  US$250– US$1,000
• Term:  Up to 18 months

3. Individual lending

Individual lending focuses on asset creation of the poor, including land and housing acquisition as well as working assets investment. This individual lending primarily supports the financing needs of small and medium scale enterprises (SMEs).

• Loan Size: US$1,000– US$5,000
• Term: Up to 24 months

These three methodologies have been designed as a graduation mechanism, so that clients have choices to select appropriate types of loans to meet their capital requirements. Depending on the preference of the client, loans can be given in both local riel (KHR) and USD currencies.

How do we measure our success?

VFC measures its success in moving its clients to the next economic tier.  These tiers are categorized as the poorest of the poor, poor, and the not-so-poor.  In a 2004 study by World Vision Australia it clearly showed VFC’s level of success with an 80% to 83% reduction in the poorest of the poor at the client level for Village Banks operating for 2-3 years and a 70% increase in not-so-poor at community level.  With over 79% of VFC’s clients being women the success of this model also has led to positive social changes with:

• a reduction of domestic violence,
• an increase in women’s rights, and
• improvements in food supply and quality.