Population and Community Development Association

Rural Microcredit

     One of PDA’s most innovative types of environmental conservation activities focuses on reforestation as a means of capital formation through Village Development Banks, which is a component of the broader Village Development Partnership (VDP). Each community generates money for a Village Development Bank by planting trees. For each tree planted, a small amount of money (approximately 40 Baht or $1.25) is put into a central revolving fund to facilitate micro loans to rural people who do not have enough collateral for a commercial bank loan. A Village Development Bank is managed by the Village Development Bank Committee that is half-male/half-female. Before being able to borrow from the Bank, villagers must buy a minimum number of shares, as well as open a savings account at the bank. A savings account pays 6% interest which is much higher than any other major bank.

     The bank gives loans to individuals or groups (at a low interest rate) to start up income generating business ventures. The trees are inspected after every year of growth and a financial bonus is put into the revolving fund for every tree that is healthy (for each tree that is dead, a deduction is made). A significant portion of the profits in the Village Bank go towards community development activities. These projects promote villager participation in forest conservation and replenishment on public lands and degraded areas. They also convert open land into forests for economic use without depleting existing ones. The Village Development Bank projects have proven to be extremely popular; they see high rates of repayment and high rates of investment.