Village Savings and Loan Associations: experience from Zanzibar

This paper describes Village Savings and Loan Associations (VSLA) as a time-bound accumulating savings and credit association (ASCA). In it, 15 to 30 people save regularly and borrow from the group fund. Loans are repaid with interest, and have a period usually between one and three months. On a date chosen by the members, usually after about a year, all the financial assets are divided amongst the members in proportion to each one’s savings. This payout is called the “action audit”. The groups normally reform immediately and start a new cycle of savings ad lending.

The VSLA methodology proposes that once mature, groups can function with no external support. Its proponents suggest that in the best programmes, 95% of the groups continue to function after two years and that the model reaches deeper into rural areas and serves poorer people than other microfinance models. The objective of this study was to examine the performance of VSLA groups in Zanzibar after several years of operation independent of CARE or other non-governmental organisations (NGOs). It also sought to understand the outreach of the programme to poorer members of the community, and its ability to provide useful services and produce change in the lives of users.

The objective is formulated into five key research questions around which the results are presented:

  1. To investigate the performance of VSLAs in terms of both outreach and sustainability in the period since CARE stopped training the groups and turned that function over to the local organisation, covering both numbers of clients and indicators of groups’ financial performance, including loan and savings volumes, arrears and default.
  2. To investigate the role of village trainers as support service providers in ongoing support to groups and expansion of the VSLA model.
  3. To investigate the poverty outreach of the VSLAs in terms of both client poverty levels and location in the context of the social and economic context of Zanzibar and availability of services from other microfinance providers.
  4. To investigate the usefulness of the financial services provided by the groups to the livelihoods of the members, and the role the savings and loans play in supporting the livelihoods of their users.
  5. To investigate through qualitative research the experience of the groups and their members in relation to internal group dynamics and how these have operated over time.
  • Resource type
  • Author Anyango, E, Esipisu, E, Opoku, L, Johnson, S, Malkamaki, M, and Musoke, C
  • Organisation
  • Year of Publication2006
  • Region
  • LanguageEnglish
  • Number of pages80 pp.
  • EditionDFID Financial Sector Deepening Project Uganda

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