Village Savings and Loan Associations (VSLAs) are small (18-25 people to a maximum of 30) member managed community-based associations or groups that voluntarily contribute their own savings (no external capital) and provide loans to their members with interest. Basically, records are kept in each member’s passbook, a summary note book and members memorization. VSLAs also contribute to a “Social Fund” to help members to take care of medical emergencies, funeral expenses, and other needs stipulated in their constitution. The term ‘Savings Groups’ or SGs, for short, is increasingly being used as a generic description of these community-based financial entities such as VSLAs.
Fadhili Trust’s ultimate goal for VSLAs is self-management with regard to each group’s capacity to carry out their financial and other activities (saving, lending, social and other activities) on their own, without the supervision or assistance from the trainer (Field Officer or Village Agent).
A VSLA is expected to achieve self-management by the end of the first cycle. A cycle is defined as the period between the time the group starts to save to the day of the Share-out. Share-out or Action Audit is the activity where members share out their accumulated savings and profits. According to Fadhili this may take nine 9 to 12 months. It is possible that a group may require assistance beyond 12 months but Fadhili Trust usually promotes a “no more than 14 months’ supervision policy. All groups are expected to be self-managed and graduate from supervision by the 14th month at the very latest. The day the group starts to save again signals the start of the next cycle.
VSL groups and business skills training has helped in providing avenues for loans to meet basic needs like purchase of food items, payment of medical bills, education of children, buy household and family assets, self-employment via accessing capital for initiating small businesses. The loans also help in meeting other household needs like supporting farming activities and acquiring farm inputs among others, cushioning the locals from engaging in environmentally detrimental activities for economic gain like sand harvesting, charcoal burning, deforestation, poaching and other social and environmental hazardous activities. This has indirectly helped in improving the local vegetation and forest cover. Many group members also have embarked on water harvesting and storage activities as they acquire loans to purchase water tanks, construct water ponds, hence improving water conservation efforts. Members also use loans to purchase solar power equipment thus migrating to clean, efficient and environmentally sound renewable energy.
The small businesses and income generating activities (IGAs) have greatly boosted the families of VSLA members by providing income and investment opportunities. Most members have one or two initiatives ranging from rope, baskets and mats making to small livestock rearing as well as water selling, food kiosks and small shops. The VSL methodology has proven to be a sustainable way of improving communities’ livelihood.