Access to financial institutions is usually limited or nonexistent for the poorest of the poor. For rural populations, the distance to the closest commercial bank, credit union or microfinance institution (MFI) is often too far and transport costs are too expensive for making use of banking services. Moreover, the minimum savings required to open a bank account are usually high while the bank charges to open an account or apply for a loan are often prohibitive for poor households. In contrast, Savings and Internal Lending Communities – SILC – are filling that gap as the amounts handled are affordable, easier to manage and within reach of the poor. Catholic Relief Services designed the Savings and Internal Lending Communities (SILC). It is a holistic programming approach that offers households a strategy to protect assets, smooth cash flow, and increase income. In comparison to traditional microfinance institutions that face limitations in servicing the financial needs of vulnerable groups such as women, poor farmers, orphans and youth, SILC is able to provide flexible financial solutions to these marginalized groups in a sustainable manner. SILC is a savings model promoted by Catholic Relief Services (CRS) and partner Organizations with its roots in traditional Rotating Savings and Credit Associations (ROSCAs), and Accumulating Savings and Credit Associations (ASCAs). SILC improves upon the ROSCA/ASCA methodology and on the traditional systems by creating accessible, transparent and flexible accumulating savings and credit groups, which are user-owned and self-managed in the communities where members reside. Instead of disbursing all the saving contributions to one member at a time, SILC is able to leverage the contributions of its members into a fund from which group members may internally borrow at a predetermined rate and term. Members normally live in the same community and are encouraged to self-select into groups with other members that they know and trust and in many cases come from a similar background. Loans are paid back, which, together with fines and fees, allows the internal fund to grow. Most groups also opt to contribute to a social fund that can be used for small grants during emergencies. At the end of a predetermined period, all or part of the total internal fund (savings, earnings, investment profits, and fines) returns to all the group members. Members receive a significant sum of money at this time, providing a considerable return on their savings. SILC members are able to keep and benefit from the money generated during their savings cycle.
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