Kula Loans International – India, Colombia, Gambia, Nepal

Kula means “community of the heart” in Sanskrit. It is a foundation, based in The Netherlands, envisioning a change in the formal financial system, to include groups and communities empowering them to grow their own wellbeing.

Currently, there are over 50 groups in Colombia, India and The Gambia. The model is soon to be replicated to Nepal and Bangladesh.

Short description social enterprise

Kula Loans is a social enterprise that promotes inclusion of the ‘unit’ that is in impoverished communities regularly the unit in which activities are undertaken that grow the wellbeing of the community, think of repairing the roof of local school, or maintenance of the road, digging a water well – all done as a group. This traditional and  informal associative mechanisms are widely used by low-income populations and create an alternative and complementary path to banking.

Kula created a group loan model, and a community chest model, based on the belief that additional capital to their savings, enables the members of a community or group to invest in community owned solutions that will grow the wellbeing of their community.

Short description solution/tool

“The community chest” is a community-owned and managed amount of (foreign) capital  provided to the  members who have pooled their own savings (and/or time investments). The foreign loan amount is pooled with their own (saved) capital and provides financial and investment opportunities for the community as a whole, and to each of the members of the group/community. The Community chest is member-owned, managed by the members themselves, and offers group-loans to the members -as a group- for various activities, when they need it.

The “group loan” is a model made as a step to grow towards a community chest. Groups of entrepreneurial people can take a group loan, to invest in a group-owned solution that will strengthen all of their income-generating activities. Mind you: they do not have to register as a legal entity for this, nor do they have to be(come) a cooperative for this. Think of a packaging machine, that can be used by all members of the group. Or a solar-powered engine, shared by a group of farmers to irrigate all of their fields.

These new types of products recognized that risks of foreign capital are usually carried by the low-income people – instead of those who’re fortunate enough to have capital. And therefore, try to shift this, in a way, that the risks are carried by both, the community and the investors. Key is, that what we aim to change is, how risk is distributed.  In favor of the low-income communities.

Available tools which could be useful for partners to communities, or change agents based in communities:

• For partners to communities we suggest to follow the VSLA training manuals, to be found here: https://www.vsla.net/vsla-tools/training-guides/  . When groups are up & running and ready to take ‘foreign’ money, in a communities that is willing to invest in a group-owned solution, reach out to us to see if group-loans or a community chest is worth exploring.

Where to find more

• http://www.kulaloans.org/
• A great resource, small piece of evidence, illustrating a similar, but different new risk sharing product, can be found here – results of a tool called micro-equity for saving groups in Rwanda: https://www.findevgateway.org/blog/2022/05/sharing-risk-micro-equity-savings-groups

Who’s best to contact

• Erlijn Sie, founder and chair

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