Village Savings and Lending Associations

Village savings and lending associations (VSLAs) are groups formed by the poor in target communities to provide sustainable and profitable microfinance services (micro savings, microcredit, micro-insurance, etc.), especially in remote places with no access to formal financial services. VSLAs are self-managed groups that do not receive any external capital and provide members with a safe place to save their money, acquire small loans, and obtain emergency insurance. They focus on building savings and assets, and provide credit proportionate to the needs and repayment capacities of the borrowers. Groups are low-cost, simple to manage, and can be seen as a first step for people to reach a more formal and wider array of financial services. VSLAs often raise the self-respect of individual members and help to build social capital within communities, particularly among women who represent approximately 70 percent of members [7].

The VSLA model was originally developed in Maradi, Niger by CARE International in 1991 and has spread to 33 countries in Africa, three in Latin America, and seven in Asia. Currently there are almost three million active participants worldwide [8]. VSLA is a generic term often used by practitioners to describe these types of community-managed finance schemes. Both CRS and Floresta have developed their own models of VSLA.

Floresta:  Village Community Banks

Floresta’s village community bank program (VICOBA) is a VSLA model that is implemented in Tanzania. In accordance with Floresta’s mandate to promote environmental sustainability, group members can save and receive loans through the “social fund” for environmental purposes, in addition to other  traditional areas, such as health and education.  Group membership is typically around 25-30 individuals with full cycle of 12 months.  Savings and interest earned are shared with group members at the end of each cycle.

Selected VICOBA groups in Marangu District, in operation for 4-5 cycles, have been grouped into a larger federation called UVIMA (Union of VICOBA in Marangu). UVIMA is comprised of 18 VICOBA groups with a membership of 600 individuals.  A benefit of being part of this larger federation is that members have the option of taking out larger loans as compared with the VICOBA groups.

CRS: Savings and Internal Lending Communities

CRS’s savings and internal lending communities (SILC) scheme make community-managed, savings–led financial services accessible to all members in the community. SILC groups are self-selected and meet regularly to save small sums of money. This money is then pooled and lent to group members for repayment with interest. After a pre-agreed period of time (usually 6-12 months), the savings plus interest from internal loans is shared among the group members in proportion to the amount each group member has saved. SILCs can tailor financial services to the specific needs of each community and have the benefit of keeping  money in the community in which it is utilized.  Once community groups are trained in the SILC methodology,  they are able to grow, develop independently, and become sustainable.

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