Introducing the Village Savings and Loan Model
A Village Savings and Loan Association (VSLA) is a group of 15-25 people (most often women) who save together and take small, low interest loans from those savings. CARE founded the VSLA model in 1991 in Niger. Based on its proven impact, CARE has promoted the methodology in over 20 countries, across Africa, Asia and Latin America. For Join My Village, the VSLA model has formed an important part of our approach to empowering women and supporting girls’ education in Kasungu District.
VSLAs are self-formed and managed, with CARE field staff for Join My Village (JMV) playing an important role in helping to form, train and coach the groups. Members in a VSLA save through the purchase of shares of between 1-5 shares every meeting. The share value is decided by the members themselves, and documented in their constitution, when the group is formed...
The loan fund is comprised of share money and loan profits (from interest) and all the members have the right to borrow up to 3 times the value of their shares. Given the fact that women in Malawi have limited access to financial services, especially in rural areas, the VSLA enables women to work towards economic equality within their families and communities. To ensure that transactions do not take place outside the association meetings, cash and passbooks are locked in a cash box which is secured with padlocks. Standard practice is for the lockbox to be secured with three padlocks, with three group members each holding one of the keys. All members have an individual passbook where all their shares and loans are recorded during each meeting.
Every VSLA has a five member management committee comprised of a Chairperson, Treasurer/Box Keeper, Secretary/Record Keeper and two Money Counters. These positions are elected at the beginning of every cycle by the group, but members have the power to replace him/her for under performance. The association also develops a constitution that contains a social fund and share purchase and loan policies. The social fund is a very important component of the VSLA as it enables the group to help cover unexpected financial emergencies. For example, if a group member has a death in the family, the customary funeral expenses can often wipe out a family’s financial reserves. Women who are in VSLAs have the opportunity to tap into the social fund for support, with repayment defined by the group’s constitution.
Throughout this year I will be introducing you to new VSLA groups and the new businesses established by successful women. In year 1 of Join My Village, over 100 VSLA were established, comprising over 1,800 members, most of whom were women. The groups were able to save (and make available for lending) the equivalent of U.S. $30,000. For Year 2 of Join My Village, we will be building off of this strong foundation, with a goal of helping to form at least 100 additional VSLA groups.