Louise PIZON

Muhammad Yunus

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Muhammad Yunus

Louise Pizon

In this article, Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022) presents the portrait of Muhammad Yunus a well-known economist.

Muhammad Yunus or the “banker to the poor” was born in June 1940 in Bangladeshi in the city of Chittagong. He is a social entrepreneur, banker, economist and civil society leader. In 1976, he founded Grameen Bank, a micro finance organization and a community development bank. Microcredit is a delivery system to provide banking services to the rural poor. He is a pioneer of micro funding and microfinance concepts. In 2006, Muhammad Yunus was awarded Nobel Peace prize for these concepts.

Muhammad Yunus
Portrait Yunus
Source: Wikipédia

After his studies in United States, he came back to Bangladesh and worked for three months for the government’s Planning Commission. He quitted to join Chittagong University as head of the Economics department. He started to be involved in poverty reduction in 1974 when famine has struck Bangladesh.

Grameen bank (“village bank”)

It is in 1976, while visiting a poor village of Jobra next to Chittagong University that Muhammad Yunus has the idea of micro funding. He offered the opportunity to women to take a very small loan to create their business. He explains that at the beginning it was complicated to convince women to take loans because they were afraid of not being able to repay the loan. Also, he faced cultural problem; indeed, male didn’t agree to let women manage money.

Grameen Bank consists in constituting groups of solidarity within the villages of people who know each other. The risk of non-refunding is very low because the shame of mismanaging the loan money, naturally prevented borrowers from being dishonest with the Grameen Bank. At the very beginning groups were formed of five people, with one with the role of president and another one of secretary. Women are so proud to be part of these groups and they are meeting every week to check the status of their finance. Grameen bank allowed them to have an easier and more secure access to their money. It never had a shortage of funds for its loans. It was always local money for the poor women in the area. Members were always told that they had to create, operate and develop their branches with their own money.

Six years after the creation of Grameen Bank, the equality gender of the member rose to a 50/50 ratio. The bank observed that the impact on the family was significantly better in families where women were the borrowers compared to families where the borrowers were men. After this the priority for women borrower was set up and it became a common policy for all microcredit programs worldwide.

Link to VICOBA

Grameen Bank has many similarities with Village Community Bank (VICOBA). VICOBA is a savings and loan fund for members who have joined together and formed a group for economic improvement purposes. The system started in Tanzania twenty years ago and has shown great success for its members in being able to lend to each other, helping each other to solve various problems as well set up joint economic projects.

Both forms of micro funding aim at empowering women and lifting families out of poverty by allowing them to borrow a small amount of money to be able to start a business and generate more money. In both cases, the groups are formed in the same way: members come from the same village and in general it is group of close friends or family members. Within the group, a steering committee of five people is elected annually with the roles of chairperson, secretary, treasurer and two accountants. Both village community banks have weekly meetings to manage the accounts and ensure that people repay on time their loans.

However, there are some differences such as the number of members in the groups: five for Grameen bank versus fifteen to thirty members for VICOBA.

The biggest difference between Grameen and VICOBA is that people part of Grameen bank must open a bank account in Grameen bank whereas VICOBA is completely manage by the members of the group and the money is lock in a box by the treasurer of the group. In VICOBA they also have the possibility to follow business trainings to help them to build their businesses.

Why should I be interested in this post?

Do you want to know how an economist won a Nobel Peace Price? Find out the story of Muhammed Yunus or “the banker to the poor” who created the concept of micro funding to help the poor rural to lift out of the poverty and let them a chance to live in better conditions. Besides being a brilliant economist, he is also a humanitarian and a successful businessman whose purpose in life is creating a World without poverty.

Related posts on the SimTrade blog

   ▶ Louise PIZON Vicoba

   ▶ Louise PIZON My professional experience as a business developer at AJISO

Useful resources

Forbes Muhammed Yunus (Prix Nobel) (in French).

About the author

The article was written in August 2022 by Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022).

My professional experience as an intern at Caisse des Dépôts

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My professional experience as an intern at Caisse des Dépôts

Louise Pizon

In this article, Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022) presents her internship experience at Bank of Territories from La Caisse des Dépôts in the Social and Solidarity Economy.

About the company

Caisse des Dépôts et Consignations (CDC), sometimes referred as Caisse des Dépôts, is a French public financial institution created in 1816. Under the direct control of a supervisory commission reporting to Parliament, it carries out general interest activities on behalf of the State and local authorities as well as competitive activities. It employs both civil servants and private-sector personnel under collective agreements.

Launched in 2018, Bank of Territories is a department of CDC. It supports local players in the service of regional development. It offers tailored advisory and financing solutions in loans and investments to meet the needs of local authorities, social housing organizations, local public companies and the legal professions. Bank of Territories also forges strategic partnerships with companies and financial players to carry out projects with a strong territorial impact. It is aimed at all territories, from rural areas to metropolitan areas, with the ambition of fighting against social inequalities and territorial fractures.

It mobilizes 20 billion by year to finance projects for local authorities and social housing actors. It has 35 local offices to ensure greater proximity to its clients. In September 2020, the Bank of Territories and BPI France launched a €40 billion “climate plan” over five years to support French companies in their ecological transition. Priority is given to building renovations and the development of renewable energies, with more than €14 billion budget for each. The rest of the budget should be devoted to innovation (5.6 billion euros), mobility (3.5 billion euros) and industry (1.5 billion euros).

To give an example, in 2013, the Caisse des Dépôts with the help of the State launched the waste recycling and insertion project in Haute Marne. The SCIC (Société Coopérative d’Intérêt Collectif) is called DIB 52 and consists of transforming common industrial waste (CIW), via the creation of platforms allowing the sorting and transformation of CIW into solid recovered fuel (SRF). This project has made it possible to respond to environmental issues thanks to an innovative industrial solution and, in addition, to create jobs.

Logo of La Banque des Territoires
Logo banque des territoires
Source: CDC

What is SSE?

The concept of Social and Solidarity Economy (SSE) designates a set of organizations in the form of cooperatives, mutual insurance, associations or foundations, whose internal functioning and activities are based on a principle of solidarity and social utility.

These enterprises adopt democratic and participatory management methods. The profits made are reinvested. Their financial resources are generally partly public.

Thus, SSE enterprises are concerned with their social or ecological impact. They aim at putting the human being and solidarity at the heart of the economy and respond to the major challenges of society (ageing well, transition to a local, sustainable food system, the circular economy).

My role and personal missions

I was intern in the Social and Solidarity Economy department of Bank of Territories.

I selected innovative start-ups respecting the environment or social utility company and I created their identity card to classify them. Indeed, to be eligible for different type of funding we need to segment them by type of activities. Then some of them will be chose to be financed and we help them for the process of development as an incubator.

The Social and Solidarity Economy department offered them a two-stage support solution for the creation stage and then the development stage. Our mission was to offer them a support as early as possible to be successful during the maturation of the project.

During the creation stage

We help for several tasks :

  • Create spaces for experimentation in each territory: specific advisors “young people” in an employment support contract, “hosting”/sponsoring of the bearers within a SSE enterprise of the sector (financed).
  • Help for the rebound in case of failure: assessments of the skills acquired during the creation.
  • Ensure a flexible and reactive support, adapted to the functioning of these initiatives, based on a mutual relationship between the mentor(s) and the entrepreneur(s)
  • Offer both technical support (legal, financial, administrative) and support on the substance of the projects’ approach (values, collective management, knowledge of the SSE …).
  • Immersions in other SSE companies, training on SSE and its values.
  • To insert the young people as soon as possible in a network as broad and varied as possible (collectives of support to projects). Mutualize the tools and devices of the SSE and the classic economy by the creation of common platforms.

During the development stage

We help them to set up supports for the perpetuation: lines of financing intended for the social innovation of young people (indicators and criteria adapted to the realities of the projects), improve the links between funders to simplify access to funding, make available specific territorial “funds of assistance” for funds for SSE activities of people under 35 years of age.

Raising awareness among local support network’ agents about the characteristics of young SSE projects. Provision of “drawing rights” on all the dimensions that cover support for young people over several years. Offer permanent and informal exchange spaces between holders to simplify the mode of creation of a SCIC. To make a place for young entrepreneurs in the SSE support systems.

Commitment of the Bank of Territories to the development of the SSE and social innovation

The State Secretariat for the SSE and Bank of Territories signed on November 3rd, 2020, an agreement to take an action on the strengthening of the support of SSE companies, the development of their financing and the support to social innovation.

With this objective in mind, Bank of Territories is mobilizing €300 million for the social and solidarity economy (SSE) between 2020 and 2022, as part of a pact to boost the SSE and social innovation.

This pact is based on two main goals:

  • Strengthening the support of SSE companies: Several actions must be carried out to improve the meeting between SSE companies and private financiers, particularly in the booming field of impact investment.
  • Financing SSE companies and social innovation

Thus, in addition to its support actions, Bank of Territories is committed to the State to deploy its investment actions over the next three years by:

  • Massively increasing the use of impact contracts*: These contracts make it possible to finance social innovation based on results and impact measurement. Within this framework, the State will launch calls for expressions of interest to identify projects in which the Bank of Territories will be able to invest in pre-financing.
  • Reinforcing its direct investments in the sectors of solidarity and medico-social services, food transition, local economic development, education and professional training, and digital inclusion.
  • Facilitate access to financing.

In addition, indirect investments (impact funds and sharing funds) will allow the Bank of Territories to multiply its support actions to SSE actors, in a complementary way to its direct investments.

General concepts

Impact contract

The impact contract is a partnership between the public and private sectors designed to encourage the emergence of innovative social and environmental projects. These contracts allow for the scaling up of solutions that have been identified in the field and are effective. The private and/or public investor pre-finances the project and takes the risk of failure in exchange for a pre-determined remuneration in case of success. The State only reimburses according to the results obtained and objectively observed by an independent evaluator.

How it works ?

The impact contract renews the financing of innovative projects carried out by actors in the social and solidarity economy. Under this system, social and environmental projects are financed by private and/or public investors, who are reimbursed by the State if the projects achieve the objectives previously set.

Impact contracts are not intended to replace traditional financing of social or environmental activities. They provide a complementary method of financing to facilitate the development of new activities or an innovative program for existing activities.

In concrete terms, the public authorities will launch calls for projects to meet social or environmental needs that are not, or are poorly, covered by the State: the selected structures will then be financed by a third-party investor. Depending on the results observed, based on indicators determined by the stakeholders, the State will remunerate the project leader, who will then be able to reimburse the investor.

Circular economy

The circular economy refers to an economic model whose objective is to produce goods and services in a sustainable manner, by limiting the consumption and waste of resources (raw materials, water, energy) as well as the production of waste. It is about breaking with the linear economy model (extract, manufacture, consume, throw away) for a “circular” economic model.

Intended to generate potential for the creation of activities and jobs, and to respond to the challenges of resource scarcity, circular economy approaches are based on the dynamics of multi-actor cooperation on a territorial scale.

Transition to a local, sustainable food system

The transition to food system refers to the process by which a society profoundly modifies its way of producing and consuming food. The term is used in the context of energy transition, the ecological transition or the demographic transition.

In the 2010s, the term transition to food system is increasingly used in the public debate to designate the expectations or efforts undertaken by the different actors in the chain (producers, processors, distributors, consumers, public authorities) to better respect the environment, improve the nutritional status of food, develop organic and fresh products, and produce under conditions that are more respectful of animal welfare and with greater equity between the actors in the chain.

Useful resources

Banque des territoires

Ellen MacArthur Foundation L’économie circulaire : du consommateur à l’utilisateur Video (in French).

About the author

The article was written in August 2022 by Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022).

My professional experience as a business developer at AJISO

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My professional experience as a business developer at AJISO

Louise Pizon

In this article, Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022) presents her personal internship experience as a business developer at AJISO in the sector of micro funding.

Presentation of the organization

AJISO is a legal aid provision organization that was established in 1998 with the aim of promoting women and children rights and access to justice in society. It empowers women and children through access to justice, organizing public awareness raising meetings about human rights, legal education and Gender-based Violence (GBV). It also trains paralegals, the ward protection committees and child rights clubs to eliminate all forms of violence in society.

After realizing that poverty is a leading cause of GBV, AJISO embarked on empowering women economically by mobilizing them into Village Community Banks (VICOBA) groups where they receive entrepreneurship trainings and other demand driven skills which in turn allows them to engage in economic activities and improve their livelihood hence reducing the risk of being subjected to GBV.

Every year AJISO together with the paralegals serve more than 500 clients and reaches out to more than 93,659 people (43,808 male and 49,851 female) in Kilimanjaro and neighboring regions with legal and GBV education.

Organization structure of AJISO
Ajiso association in Tanzania
Source: Ajiso

Organization structure of AJISO
Organization structure
Source: Ajiso

My role

My role within the organization was to help underprivileged women and disadvantaged minorities in Tanzania to get out of poverty and empower them. I was also in charge of finding new solutions to resolve problems and limits they are facing in their daily life and VICOBA groups.

My personal missions

The main mission was to promote human rights, access to justice and socio-economic empowerment of women and children in Tanzania :

My first mission was to work on VICOBA which is the main solution use by AJISO to help low-income and poor people to get out of the poverty by using micro funding. The solution of VICOBA groups to help people to build their own business. This solution is great and successful but has limits, so I found solution to these limits.

My second mission was to help communities, especially women that wish to join these groups but are unable to afford shares due to their extreme poverty situations. You need 10.000 Shilling to enter in these groups which represent around 3 euros.

My third mission was to work on the problem of wood in households. Indeed, most of the households have a traditional oven which uses a lot of wood. Women spend a lot of time in the wood to find firewood and during this time they are losing customers and money. Because of this they are enabled to buy shares in VICOBA group.

In addition to my missions, I have been working on the preparation of a training guide on VICOBA groups for a better understanding of the system for members and interested people.

Required skills needed

To work for AJISO you need minimum a bachelor’s in economics. The skills and knowledge needed are basics in finance, background in law, social work, gender issues, media or other relevant fields.

The language requirement is English C1.

You need to be flexible and have a strong adaptability to other culture as you will face “different” ways of work, “different” times of work, “different” ways of communication, and different planning and organization. You need also to be altruist to live together. It means a “different” way of managing projects and “different” expectations about the results of the projects. You should be capable to cope with these differences.

You need to send a contribution of 450€ to participate to the program.

Concepts

Village Community Bank (VICOBA)

VICOBA (Village Community Bank) is a savings and loan fund for members who have joined together and formed a group for economic improved purposes. The system started in Tanzania twenty years ago and has shown great success for its members to be able to lend to each other, help each other in various problems as well set up joint economic projects.

The micro funding provided by VICOBA involves banking transactions and group deposits using a share system. Shares are funds that are invested by a group member in the group for the purpose of making profit and becoming the owner of the group. A group member can buy one or more shares. The value of one share will be based on the agreement of the members of the group and it is recommended that the rate take into account the economic potential of its members. So, this feature requires group members to buy shares for each one by loudly stating the number of shares they are buying and the amount of social fund they are investing.

The VICOBA system is like any other financial system that requires a lot of attention in managing its records and assets. The VICOBA system encourages records to be stored in categories (shares and loans) and this is to simplify and be sure when one of the records is read differently or when it causes controversy. In the VICOBA system, records are recorded in the member’s book, group ledger.

With the help of the Economic Empowerment program of AJISO, at least 900 (756 female and 144 male) people including people living with disabilities 34 (18 male and 16 Female) were empowered with knowledge of VICOBA and entrepreneurship which in turn has enabled them to start and expand their businesses to improve their livelihood.

Economic benefits from VICOBA Bank

VICOBA has a lot of economic benefits compare to a normal bank. VICOBA members can benefit from borrowing’ procedures without collateral. The low interest rates are decided by the group members and it is charge between 5 to 10%. At the end of each cycle, shareholders received a return on investment. So, you can win money by simply injecting money into the fund (buying shares).

The poor and low-income household have access to a wide range of financial services such as deposit, loans, payment services, money transfers and insurance products.
All these benefits permit to low-income household to be able to invest in their small businesses and increase their income. VICOBA bank is simple with transparent transactions, It is a safe economic and a good way to secure group members’ market.

Weekly meeting of a VICOBA group
Meeting Vicoba
Source: Vicoba

My takeaway

Working for AJISO was a great experience both on a professional and personal level.

During this internship I understood that the success of an organization is based on the projects that propose long-term solutions to the problems of development and poverty. It was very beneficial to me and made me understand the importance of our involvement in a responsible cooperation generating a human development which will allow the village population that wish develop their business to set up autonomous actions to reach precise objectives. I believe that we can reduce poverty with the implementation of community development, social justice and various forms of emergency interventions.

For the personal aspect, I have acquired a greater sensitivity and knowledge of global inequalities. I understand the importance of helping each other to make things evolve. I learned to be humble because we are so lucky to live in such conditions in France and I am thankful.

Why should I be interested in this post?

If you are interesting to work for a NGO or helping low income people to going out of the poverty through micro funding this post is for you. In this post, I explain my experience as a business developer withing the association AJISO headquarter in Tanzania. And how an almost entirely female association has succeeded in lifted a large part of the population out of poverty.

Related posts on the SimTrade blog

   ▶ All posts about Professional experiences

   ▶ Louise PIZON Vicoba

Useful resources

AJISO

About the author

The article was written in August 2022 by Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022).

VICOBA

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VICOBA

Louise Pizon

In this article, Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022) explains the concept of Village Community Bank (VICOBA) which is a type of micro funding used in non-governmental organizations (NGOs).

Village Community Bank (VICOBA)

Village Community Bank (VICOBA) is a savings and loan fund for members who have joined together and formed a group for economic improvement purposes. The system started in Tanzania twenty years ago and has shown great success for its members in being able to lend to each other, helping each other to solve various problems as well set up joint economic projects.

What is micro funding? It is the funding of projects that are too small to gain support from mainstream venture capital firms. Through micro funding, such projects can be linked to a group of investors willing to take a chance on the project. Micro funding allows entrepreneur to network with investors and managers to grow your business to the next level.

Purpose of VICOBA group and activities

A VICOBA group is a group of people who have agreed to gather their strengths and resources together to eradicate poverty and bring development in their household. Group members will participate to all group activities as weekly meetings and general meetings, elect a steering committee and establish group rules to guide them.

It is better for groups to meet weekly to increase intimacy and help the loan’ fund to grow faster. Previous experiences have shown that the growth of a group that meet weekly is faster from the growth of a group that meet once a month. Weekly meeting helps people to repay their loans on time and keep the cash flow within the group stable.

All VICOBA group activities are run by the group members themselves through volunteerism. By experience, group members can effectively carry out their activities after receiving leadership training and management teamwork from VICOBA experts, which are AJISO members.

AJISO is a legal aid provision organization in Tanzania who help women to empowered themselves economically, in pushing them to be part of a VICOBA group and giving them some entrepreneurship trainings to allows them to be engage in economic activities and improve their livelihood.

Steps to create a VICOBA group

A VICOBA group is created following the steps:

  • Persons with the idea of starting a group to meet (not less than fifteen and not more than thirty)
  • Members collect admission fees usually 10,000 TZS per member. The money is used to buy equipment such as ledgers, passbooks, etc.; Admission fees are also used for group registration costs.
  • Members start the training supervised by an AJISO trainer.
  • Members formulate a constitution and rules that will include the level of shares, the social fund, and the date of the meeting.

Details rules of VICOBA

VICOBA groups are made up of 15 to 30 members who are self-selected. These groups come from small groups of five people whose members select and assemble themselves. Members begin to buy shares in the group and after a delay of twelve weeks the share fund begins to be lent to its members.

Membership of VICOBA groups is open to women and men and at least two of the five members of the steering committee must be women. A person who is heavily indebted to other such groups will not be allowed to join the scheme until he has paid off his debts. Religious and government leaders will be allowed to join the program but will not be allowed to lead the group, these leaders are not allowed to be leaders due to their positions and responsibilities they have in society, instead they will be group advisors.

VICOBA groups elect their leaders who are a chairperson, a secretary, a treasurer and two accountants. The members of the steering committee are elected annually and may be removed at any time if 2/3 of the members of the general assembly decide so. VICOBA groups formulate their own rules of governance, and these groups are self-reliant. Each group has its own rules, and these rules give authority to the group leadership to show direction for the conduct of group activities as well as the resolution of group conflicts.

Each participant needs to know all the group rules and to follow them accordingly. VICOBA groups met in a specific order: group members determine the best time to meet. This system emphasizes the group meeting weekly but may consider meeting monthly but will depend on the activities carried out by the members themselves. The group will agree on the date of the meeting, the time of the meeting and the place of meeting. However, the group is important to consider what this program suggests to going further strengthen collaboration and communication to be closer among members. Meeting weekly will allow some members who want to take out loans to make it easier and those who want to take out emergency loans as well.

Fundraising process

The fundraising process involves banking transactions and group deposits using a share system. Shares are funds that are injected by a group member into the group for the purpose of making profit and becoming the owner of the group. Group members contribute financially each week in buying one to five shares. The value of one share will be based on the agreement of the members of the group and it is recommended that the rate take into account the economic potential of its members.

This system requires that each group members buy shares in loudly stating the number of shares that they are buying and the amount of social fund they are investing. The member will submit the money to the accountants and the book is handed over to the treasurer for replenishing the shares and social fund in which the member has invested.

Procedures for repaying loans

Loans given to VICOBA members should be repaid with a small interest which is used to fund the group. This supplement is distributed as a benefit to members based on the number of shares, they have each deposited. Initial loans that are usually smaller than subsequent loans are required to be repaid for a period of 3 to 6 months.

Benefits

VICOBA loans are small loans granted to the poor and low-income households for their microenterprises and small businesses to enable them to raise their income levels and improve their living standards.

This micro lending model has ensured women to be empowered and independent enough through loans taken from VICOBA, using this loan to develop their economic activities. This system promotes the integration of the poor into the process of economic growth, people who do not have access to the formal labor market can often benefit from pooling resources and working in these groups. VICOBA has cultivated the culture of saving, now members have some money to curter their daily expenses and savings. Most of them have changed from poor life to a better life.

Example of success story

Mary CHARLES (37 years old) lives in Usseri division tell her story :

“I am able to provide to my family all the necessities they need, including food, clothing, and medical treatment. I can educate my two children, one is in seventh grade and the other one in third grade, thanks to my dress hair salon business. I obtained the capital to start my business after joining a VICOBA group. I was able to borrow six hundred thousand shillings (600,000 TZS) and so far, I have been able to repay four and half thousand shillings (450,000 TZS) through the profit I get from my business. I aimed to have another salon in the Tara kea Division at the marketplace. Corona’s disease has pushed me back because the business was so volatile, customers were afraid of getting an infection.”

Mary Charles in her shop
Mary Charles
Source: Mary Charles

Why should I be interested in this post?

If you are interesting to work for a NGO or helping low income people to going out of the poverty through micro funding this post is for you. In this post, I explain the principle of micro funding named VICOBA using by the association AJISO headquarter in Tanzania to help the population to live in better conditions and more particularly empowered women.
This system can be used in all countries, it only needs a good and devoted team to train future members to be autonomous and teach them some basic business knowledges.

Useful resources

VICOBA Micro funding (ICD)

Related posts on the SimTrade blog

   ▶ All posts about professional experiences

   ▶ Louise PIZON My professional experience as a business developer at AJISO

About the author

The article was written in August 2022 by Louise PIZON (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2020-2022).