Notes to broadcasters
A Village Savings and Loan Association (VSLA) is a group of 10 to 25 self-selected individuals who meet regularly to save together and take small loans from those savings. A VSLA group is also known as a “chama”’ in Kenya, which means “savings group” in Swahili. VSLA group activities typically run in cycles of one year, after which each member receives accumulated savings. The accumulated interest from the loans is also shared out among the membership in proportion to the amount each member has saved. The annual share-out resolves any outstanding issues and builds confidence in the system.
The purpose of a VSLA is to provide its members with a safe place to save their money, to access loans, and to invest funds to address their socio-economic challenges. They mainly serve women and young people who do not have easy access to formal financial services. In countries where VSLAs thrive, there has been an improvement in financial inclusion, household business outcomes, and women’s empowerment. Members, and in particular women, have become more self-sufficient and support their spouses in meeting household needs. They can therefore help pay for needs such as school, healthcare, farm inputs, and providing nutritious meals at home. Members of VSLAs gain a support network that is useful especially during stressful times. And with easier access to cash, women rely less on credit.
This results in women having new opportunities to buy more and better supplies as well as receiving more services than before to improve their farming practices and businesses VSLAs elects the management committee of five persons with clearly defined roles and responsibilities. This encourages all members to participate in the group’s operations.
VSLAs encourage a culture of saving among members, who are required to save weekly by buying shares. The share price is determined by the members of the association at the beginning of the cycle.
Each group may decide to have a social fund, which provides members with a basic form of insurance and serves as a community safety net for emergencies like funeral expenses. The VSLA maintains a simple centralized record book and individual member passbooks to track savings, loans, and social fund transactions during each meeting.
After the share-out, members who do not wish to continue ma leave the group and new members may be invited to join. Then the members conduct new elections, review their constitution, and may make changes to the conditions that apply to savings, lending, and the social fund.
Research in five countries over five years showed that 89% of VSLAs restart every year and, on average, have doubled their capitalization.
This script is a six-scene drama that shows how Village Savings and Loan Association (VSLA) are beneficial in a rural setting. The script talks about how a group of women in a village in Western Kenya overcome financial challenges made worse by the COVID-19 pandemic. Although their VSLA operations are affected, they manage to launch some income-generating activities and continue with their contributions until the end of the group
Recently, the officials convinced the county government to allow short meetings every two weeks because chama groups were an essential service—the members depend on the money raised in the chama to meet their family’s basic needs. The county government agreed to their request on condition that the COVID-19 prevention rules be observed. Today is their first meeting with the chama officials and a few members since the COVID-19 crisis began.
We can review this in three months to see how we are doing. Now, in view of the circumstances, we shall also have to suspend lending and encourage members to pay outstanding loans.
Contributed by: Winnie Onyimbo, Trans World Radio, Nairobi, Kenya
Reviewed by: Vincent Alila, Technical Director, LACOMP Company Limited
Lacomp Co. Ltd website: https://lacomp.co.ke/about-us/
Innovations for Poverty Action website: https://www.poverty-action.org/
Vincent Alila, interview conducted on February 17, 2021