Village Savings & Loan Associations
80% of the world’s poor live in rural areas and work mainly in farming, according to the World Bank. By giving people in farming communities better ways to lend, loan and save their money, we encourage stability, empower women and help children stay in school. Village savings and loan associations (VSLAs) do just that, especially in areas where banks are not accessible.
Rural families often depend on the success of harvests and demand for their crops. If yields are low, parents may not be able to afford to send their children to school and must send them to the fields to work instead.
Helping rural families manage incomes
Savings and Loan groups are made up of community members, who pool their savings, give each other loans, learn to better manage their money and sometimes even gain skills to start their own businesses. Rural families cannot usually access banking services making lending, loaning and saving difficult. Agricultural communities are vulnerable to economic shocks like illness, death or natural disasters. Financial vulnerability in rural areas is a key driver of poverty and unstable income. VSLAs help their members better manage irregular cashflow that comes with harvests by ensuring that members find other ways to make income, start and grow their savings and provide a safety net in case of emergencies.
ECLT staff spoke with members of VSLAs from our projects in Tanzania, Uganda, Malawi and Mozambique to find out how saving and lending together has impacted their lives. Empowering women through financial independence
“There is visible change. I have started a small business. I am now able to support my children to go to school. I have constructed a new house. I am living a modern life” shared a mother who attends a VSLA group in Tanzania. More than 50% of ECLT’s VSLA members are women, enabling them to gain financial independence and often start their own businesses. These economic opportunities give women more control over the household expenses and decisions. Women not only benefit from financial assistance, they also contribute, manage and administer community funds working with other members.
Giving children a brighter future
“Poverty is certainly the greatest single force driving children into the workplace,” according to experts at the ILO.
Understanding and tackling poverty is crucial to addressing the root causes of child labour. When rural parents do not earn enough money, it often becomes necessary to send children to work to meet the family’s basic needs. Being part of a VSLA often helps parents send their children to school, even during times of the year which are usually financially difficult.
A member of a VSLA group in Uganda told us, “I have been able to educate my child and send them to college. My children have a brighter future than I had”. In Uganda, over 21,400 adults belong to village savings and loan groups supported by ECLT.
Social support
“This group has members from 12 tribes. Previously, these people would find it hard to work together and tribal conflict was common. In the VSLA, these members now have a common interest, which strengthens social cohesion.” shared a VSLA member from Uganda.
When VSLA members come together to save their money, they also act as support networks for each other. Many VSLA members shared that they have found a sense of connection and belonging by being part of the group. Another participant shared ''I am HIV-positive. I had lost face and all love in this community. I found love in this group. From VSLA participation, I now have 300 birds, can look after myself and my family”.
A locally-owned solution
For VSLAs to be sustainable they must be locally-owned. Group members are trained on VSLA methodology so that they can run their own groups, offer support to all the participants and keep activities going without outside help or supervision.