IMPROVED PRODUCT DELIVERY & DEVELOPMENT
There is a significant number of Ugandans, probably measured in the millions, whose level of economic activity is insufficient to make them interesting clients to banks, MFIs, or SACCOs. This group has credit needs in the range of 5,000 to 50,000 Uganda shillings ($2.50 to $25) and limited savings capacity. These people have multiple economic activities usually including subsistence agriculture. The limitation on their economic activity is not an absolute lack of wealth as much as lack of monetisation. Village Savings & Loans Associations (VSLAs) have proved particularly suitable for meeting the financial needs of these people.
VSLAs are Accumulating Savings and Credit Associations (ASCAs) with a particularly rich methodology that has been tested with hundreds of thousands of saver-borrowers, notably but not exclusively in Niger, Tanzania and in Zimbabwe. They typically have about twenty-five members. They save and borrow for about a year, then distribute their retained earnings, then dissolve themselves, only to reform immediately after. The moment of dissolution and reforming is the occasion at which people to leave or enter the group, and the members readjust savings requirements, loan amounts, interest rates, or other elements of the institution. The VSLAs have some clear advantages over other institutional forms for the populations they serve and for their partners:
VSLAs also have drawbacks. They have limited savings and borrowing options compared to modern MFIs, though they offer a more appropriate menu of options than minimalist programmes. There is active debate on whether the cost-per-member compares favourably or not with other options. Typically, the big implementing international NGOs cost USD 20-25 per member; some practioners believe it is possible to reduce that cost by half or more. Similarly, there is lively discussion about the risks and benefits of linking these groups with financial institutions.
Once the training has been completed, the VSLA methodology becomes almost part of the culture, and not infrequently, well-trained groups pass the methodology on to new members, so that the number of participants can be greater than the number of people trained. People with no formal education can master the management tasks.
FSDU, CARE and CREAM started a pilot scheme to introduce a standard model VSLA in Moyo and Yumbe districts from 2004.
evaluation of the pilot was done by Hugh Allen who made several important
recommendations in the following report.
In addition, FSDU is providing direct support to the Uganda Women’s Effort to Save Orphans (UWESO) to improve their rapidly growing programme. UWESO promises a somewhat lower cost per member, and has adopted some of the latest elements of VSLA practice, including daily savings and ledgerless bookkeeping.
FSDU co-funded and participated in the design and execution of one of the most credible studies to date of VSLA programmes, that of Zanzibar, where the implementing partner, CARE, had pulled out, leaving the programme on its own. The evaluation showed steady growth with overall good quality in the absence of on-going technical or financial support, largely confirming some of the claims that are made about the viability of the VSLA approach.