CHOICE's
Three Stages of a Rural Entrepreneurship Training Program

1. Self-sustaining Savings Groups. In this program local RDFs will encourage the poorer individuals in rural villages to begin a program of savings, both to mobilize local resources for their own use and also to reinforce the commitment and discipline needed for such people to become self-reliant.

2. Flexible Small Credit Systems. This program will establish small credit groups in these communities which allow men and women to obtain small loans for small scale enterprises, income generating projects of various kinds, and loans for emergencies and short term consumption needs.

3. Integrated Training Centers. These training centers provide specific training through demonstrations, counseling, and instruction in marketing, agricultural production, small animal and livestock care, handicraft manufacturing, simple bookkeeping and other entrepreneurial skills needed to succeed in establishing various small income generating projects, and other activities that will improve the quality of life for these people.

The process by which this three-fold Rural Enterpreneurship program is established includes some three stages to be implemented in six specific steps:

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A. Stage One. A Subsidized Savings and Small Loan-Giving Group Program

Step 1. Working in collaboration with CHOICE, local RDFs help villagers organize and strengthen small savings groups, each organized to ensure a weekly deposit of some small amount into an account that provides the assets needed to establish a small group credit system.

Step 2. In step two, local RDFs help these small savings groups gradually evolve into small loan- giving groups. At this stage some financial resources are given at some ratio, generally for every dollar saved by the villagers, CHOICE contributes $2-3. The loans are small (generally less than $100), some minimal amount of interest is charged. During the period of this stage, the small loan giving groups gradually develop their capacity to pay such loans back, develop entrepreneurial skills in small scale enterprise, and establish a sense loyalty and commitment to the group of villagers working together. (It generally costs $15,000 a year to start a stage one program in a given area). It would be CHOICE's goal to have five RDFs implementing this program by the end of 1997 in Mexico, Bolivia, Guatemala, Kenya and Vietnam.

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B. Stage Two: A Transitional Micro Credit (Rural Bank) Program

Step 3. While CHOICE provides the resources needed to pay for the salaries of the RDFs and the other staff needed to build and monitor the activities of Stage One, in Stage Two, CHOICE helps establish a more formal micro-credit program (Rural Bank Program) among a cluster of saving and loan-giving groups. Generally this cluster of at least 20 groups of 5-10 women is located in a common geographical area which allows for some interaction and instruction in a common Rural Entrepreneurial Training Center. The goal of this transitional stage is to help the village micro-credit groups to become a Village Banking Program, hopefully at this stage becoming somewhat self-sustaining.

Step 4. When a cluster of 20 groups or more is formalized into a district rural Bank Program, interest is charged that is higher than the commercial bank rate (1-2% per month), lower than the typical money lender rates (5-10% per month). but high enough to exceed the inflation rate and to cover some of the overhead costs of the Village Bank (3-4% per month). The major purpose of Stage Two is the create a cluster of village saving and loan groups who become committed to creating a self-sustaining banking system, structured to provide credit to the poorer individuals in the area. (It generally costs $50-$75,000 to build and equip a Rural Entrepreneurial Training Center).

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C. Stage Three: An Integrated Commercial Bank System for the Rural Poor

Step 5. In stage three, when perhaps as many as a 50-100 groups are functioning, the village bank system in a given district has generally created a large enough pool of savings that outside resources are less important, if the interest rates paid are at the rate of 3-4% per month, most of the costs of the bank program can be covered locally. If steps four and five have been successfully documented, demonstrating that the village participants have not only been repaying their loans, but have also been paying a commercially viable rate of interest, at this point the CHOICE RDF in the area will be encouraged to contact a commercial bank and to encourage the bank to consider opening a local branch in the area of the village bank. While the villagers participating in this CHOICE Rural Entrepreneurial Training Program were never able to obtain loans from commercial banks before because of their lack of collateral, it is hoped that a commercial bank might be encouraged to establish a line of credit for the participants of the Village Bank Program, perhaps with CHOICE guaranteeing these loans up to some fixed amount for some specified period of time (generally one year or less).

Step Six. In the final step of this program, the village bank system in a given district is fully integrated into a commercial bank system. While no individual participant before was able to obtain credit because of the lack of collateral, literacy and skill, the assumption of this program is that the demonstrated willingness of these villagers to repay their loans with interest in the CHOICE program becomes a form of collective collateral that should entice some commercial banking or credit union system to integrate these villagers into their formal financial system. It is anticipated that all three stages require roughly five years to complete, at which time CHOICE then moves to another rural district and starts the whole process over again. CHOICE has established a group of Executive Advisors who are committed to helping establish a Rural Entrepreneurial Training Program. We invite others to join with us in creating this program in all the areas where CHOICE is presently working or will be working in the future.

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Hari Srinivas - hsrinivas@gdrc.org
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