Rural communities in Colombia have developed savings and loans plans that are funding and fueling small business growth.
A strong foundation is the key to all structures, creating a solid base so that better things can follow. In rural Colombian communities, a strong financial foundation isn’t simply built by one person; it is a collaborative effort that depends on an entire community working together.
However, when political, social, or economic tensions rise, community foundations can become unstable. Local banks in Antioquia, Córdoba, and Tumaco were finding it difficult to provide personal and business loans. Community members felt discouraged from even applying for the loans, thanks to the complex and time-consuming application process. This had a domino effect: Without the necessary financial services in rural areas, municipalities couldn’t maintain roads, bridges, and buildings. In addition, many potential entrepreneurs lacked access to the funding they needed to start and grow businesses.
Overcoming these obstacles required building a stronger financial foundation that communities could maintain. This was the reasoning behind the Grupos de Ahorro y Crédito (GLAC), a savings and loans program that USAID’s Consolidation and Enhanced Livelihood Initiative North/South (CELI N/S) established in 2013. Along with the Colombian government’s microfinance inclusion program, Banca de Oportunidades, and the business-oriented Colombian NGO, Corporación Vital, CELI N/S launched the GLAC program across 16 conflict-affected municipalities in Antioquia, Córdoba, and Tumaco. Implemented mostly by women’s organizations, the GLAC program is based on a community banking model that promotes savings and loans among small groups, each under 20 people.
In Antioquia, Córdoba, and Tumaco, the process of establishing a GLAC began with the CELI team meeting with communities to explain the process of how GLACs work with and for the community. These communities then decided whether or not they wanted to establish a GLAC. Once a GLAC was approved and established, Banca de Oportunidades provided its members, through the CELI N/S program, with institutional support. This support has ensured that the most vulnerable populations have access to financial services.
The effects were nearly immediate. In the first year of implementation, more than 1,700 GLACs were created, leading to more than $3.5 million in savings and more than 37,000 people, including vulnerable populations, gaining access to increased finance. More importantly, the GLACs cultivated a culture of giving back to the community to continue a self-sustaining cycle of economic growth.
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