Barclays to Invest £10m in Community Finance Schemes

Sep 2008
London, United Kingdom, September, 26 2008 - A project that will give hundreds of thousands of people in developing countries access to community-based financial services will be launched today in New York. The programme is led by Barclays and follows a pilot project the bank has been undertaking in Uganda to support Village Savings and Loans Associations (VSLAs) in a joint project with the Guardian.

Over the past year, the bank has been supporting the expansion of VSLAs in Katine, a sub-county of north east Uganda. Barclays is donating £1.5m to a three-year development project in the region being carried out by the African Medical and Research Foundation and Farm Africa, and supported by the Guardian.

Today's announcement will see the expansion of existing community-based financial services, such as VSLAs, and the introduction of new programmes in 10 countries across Africa, Asia and Latin America. Barclays will invest $20m (£10.8m) over three years to fund microfinance schemes with Care International, which is working with Barclays in Katine, and Plan International. It will also be working with consultancy firm Accenture.

The project will be announced by the former US president Bill Clinton at the Clinton Global Initiative (CGI) annual meeting in New York, expected to be attended by more than 50 current or former heads of states. The CGI was established to spearhead change in the areas of education, global health, poverty alleviation and energy and climate change.

The programme builds on Barclays work in Katine and similar microfinance projects in Ghana.

VSLAs are set up and run by small groups of between 15 to 20 people who want a safe place to save their money and access small loans. Each member of the association deposits a regular sum, on a weekly or monthly basis, which provides a pool of money from which members can borrow to pay unexpected bills and expenses. Each year the association is wound up and members are given back their stake with added interest. The group is then reformed. Interest rates are high – around 10% - which means loans are often short-term.

Microfinance has been hailed as a major step towards reducing poverty, empowering people to govern their own finances, and the VSLAs being introduced across Katine form part of the project's livelihoods component. But these financial schemes are not without critics, who question whether they can really help the very poor and believe high interest rates could lead to greater debt levels.

The bank is now working with Care International and Ugandan NGO UWESO to help establish 200 VSLAs across Katine. It also wants to develop more sophisticated financial services for people with more capital and to encourage people to use other banking services. Barclays opened a branch in Soroti earlier this year.

Julius Moses Otim, the chairman of the Ojemorun United Farmers Group in Katine, which formally established a VSLA last month, told the Guardian that the association would help the group fight poverty by increasing its income-generating powers. "As a farmer you may be running a small business on the side, or you may have a business idea, such as trading in firewood or produce, but you lack capital. The VSLA will now allow us to borrow some money," he said.

Barclays will be seeing if the work in Katine could be replicated elsewhere in Africa. Similar projects could be introduced elsewhere in Uganda and further afield in Zambia and Mozambique.

Archie Cox, chairman of Barclays Americas, said: "Tackling financial exclusion is one of the most powerful routes to helping people break out of the poverty cycle. By improving access to financial services, this partnership aims to provide people with the financial security needed to build a sustainable future, educate their children and meet basic needs such as health and nutrition."

A spokeswoman for Care International, added that the new partnership was "an important contribution to Care's ongoing work to tackle financial exclusion across the world".

She added that the partnership would support Care's ambitious Access Africa programme, which aims to deliver financial services to 30 million people in Africa over the next 10 years.

Source : The Guardian

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