Seven Reasons VSLA Is Smart Microfinance
Written by Plant With Purpose on December 21, 2016 in General, List
The Village Savings and Loan Associations (VSLA) model may just be the best-kept secret in microfinance. Plant With Purpose began implementing this innovative methodology with groups in Tanzania in 2009, and it has become so successful that all Plant With Purpose programs are now using this approach to microfinance. There are currently 1,161 groups with over 29,400 individuals meeting weekly to save. A combined sum of savings, loans, fines, and the social fund – know as member equity – currently totals almost $3 million.
Here’s why it works:
Traditional microfinance models depend on a continuous influx of outside capital, but VSLA equips groups to mobilize their own funds. Instead of giving loans, Plant With Purpose provides high-quality training.
2. Rural Inclusion
Most microfinance institutions (MFIs) tend to avoid rural communities because they are expensive to access and serve, but VSLAs are ideal for rural communities.
The majority of people living in rural areas have no access to formal banking, so VSLAs become a way to safely save, allowing families to plan for the future.
4. Interest Accrual
The buck literally stops here with VSLA groups because interest payments stay with the group rather than going to outside MFIs.
5. Repayment Rates
According to VSL Associates, VSLA groups have the highest loan repayment rates of any microfinance model in the world.
6. Leadership Development
Groups are self-governed, so members have opportunities to exercise democratic leadership skills.
People discover how much they are capable of doing on their own. Not only does this instill dignity, but there is an overflow effect in which groups decide to tackle other issues within their communities.