Microfinance Focus May 24, 2011: As part of its Millennium Development Goals, the UNICEF has developed a project titled ‘Bancos Comunales’ – Communal Banks which extends credit to indigenous people, mainly women, in 13 remote municipalities of northern Potosí, Bolivia.

The Bancos Comunales project offers loans of up to 3,000 bolivianos (about $425) at an interest rate of 2 per cent. Three-quarters of the interest goes toward increasing the communal bank’s reserves, while the rest goes into a savings account for the borrower. This amount is returned once he or she has finished paying the loan, usually within 12 months.

According to the UNICEF, it is almost impossible for the population in Bolivia to get loans for small, income-generating ventures. The Bancos Comunales project offers micro credit at low rates and is directed and driven by the community.

The project comprises of an association of nearly70 communal banks in Potosí and besides extending loans, it trains participants in microcredit financing, gender equality, leadership and basic rights.

UNICEF Bolivia Chief of Policy Claudio Santibanez explains that unlike other microfinance initiatives, communal banks are created in the most extremely poor communities and thus have a strong equity approach. They engage with a socially vulnerable population that otherwise would be excluded from financial markets.

Because local residents own the communal banks, money and capital stay in the community. Combined with training in agricultural and trade techniques, this provides food security and a sustainable economic base even for the poorest families.

Santibanez also points out that Bancos Comunales trains women in understanding and advocating for their rights and those of their children. “Providing access to micro-loans jointly with other initiatives that empower communities on protecting their children’s rights is a strong combination,” he says.