Reaching the Rural: The Vulnerable Services Unit at KREDIT

In a country with approximately 20% of the population living on less than 1 dollar per day, and over 80% rural, how do you define and target the more “vulnerable” groups? This is the challenge faced by the Vulnerable Services Unit at KREDIT Microfinance Institute, Kiva’s oldest field partner in Cambodia.

One way to create the parameters of this definition is to focus on borrowers and rural entrepreneurs with little or no collateral. These individuals would not qualify for even the most basic loan products in a typical MFI portfolio, so they form groups in order to vouch for each other and encourage timely repayments.


What is a Group Loan?
In KREDIT’s Vulnerable Services Unit (VSU) portfolio, groups of 4-6 friends and neighbors team up to apply for loans. With minimal (or no) collateral, it is the social bond between the borrowers that establishes the motivation to keep current on repayments. The whole group is responsible for each member. In order not to let their peers down, each borrower must take extra care to make sure they are using their loan responsibly and thus able to keep current on the repayment schedule.

Community Banks
In many cases, anywhere between two and twenty of these groups coalesce into a larger, village wide group referred to as a “community bank”. When loans are disbursed to the community bank, sometimes each member receives a portion of the funding, and sometimes there is a rotation within loan cycles on who will receive the benefits.


Focusing on the Rural
The VSU at KREDIT focuses on groups of borrowers that reside more than 30km away from the nearest district town. This may not sound far, but considering the lack of paved roads and rugged terrain, this can be a case of significant isolation. Twenty of KREDIT’s branch officers across Cambodia offer specialized group loan products through the VSU. By serving borrowers who are off the radar from standard portfolio loans, their social impact is amplified - promoting micro-industry in some of the poorest and most remote areas of the country.


Additional Services Offered
Through cost saving mechanisms, such as Kiva’s 0% interest capital, as well as grant funding and partnerships with various NGO’s – the VSU is also able to offer more ‘hands on’ assistance to some of their clients. Each year, about 80 group and community bank loan recipients (out of about 4,000 VSU clients/groups) are eligible for specialized training in areas of their choice. Usually focused on agriculture and animal husbandry, borrowers can select which type of practical training they would like to receive. The training is quite comprehensive, and also includes follow up sessions and refresher courses offered in their home villages. I had the pleasure of attending one of these training sessions in Siem Reap province, and I left the demonstration feeling quite confident in my chicken raising abilities! Topics ranged from proper ways to set up and arrange chicken coops to the most effective method of producing various types of feed. All of these lessons are tailored to the local context of the community, and presented in a very clear and easy to understand format. This is the third year that the VSU has offered such training to their clients, as they continue to expand the program annually.


Real Success, Real People
One of the VSU clients that we met with had no land of her own, and thus would most likely be ineligible for most MFI loans – which typically require a small amount of collateral. She works as a seasonal rice harvester, and also as the caretaker at her village church. A group loan through the VSU allowed her to grow eggplant on church grounds in order to supplement her income during the rice harvest offseason. After three loan cycles, she is now self sufficient and able to start saving money to eventually purchase her own land!

I am working with 4 MFI field partners during my Fellowship in Cambodia, and will be profiling each of these wonderful organizations in coming posts. To learn more about KREDIT Ltd., click here. To browse lender profiles and support a KREDIT borrower, click here!