STiR coffee and tea magazine

STiR coffee and tea 23 participating in VSLAs achieve much more than just financial stability, although that in itself is a massive achievement. Partici- pants have reported higher confidence levels, improved negotia- tion and communication skills, more agency and self-efficacy, economic resilience, leadership abilities, improved health, and increased market access. In an interview with STiR Vidhya Sriram, CARE USA's senior director for VSLAs, explained the principles behind the methodology. "Effectively, it is a group of people within a community com- ing together and saving together. They are the owners of this. They set the terms and the interest rates. They decide who the leader of this 'community bank' is, and they decide who they're going to lend to. So, unlike a microfinance institution, the folks in that bank of yours are your friends, neighbors, sisters, and children. They are very invested in what happens to you and how you use the loans that come from that pot of funding." Newly formed VSLAs spend the first few months learning about financial literacy, accounting, bookkeeping, and how to utilize digital finance tools. During this time, bonding as a group is heavily emphasized, which is the key to its success. "Solidar- ity is as important as their understanding of financial literacy because that keeps the group going beyond our engagement," says Sriram. Before a group starts lending, it must decide on a share value together. Then, members can begin buying up to five shares a week. CARE VSLAs limit shares to five per person to prevent disparities and monopolies from forming. "It accrues pretty quickly, and then, within a couple of months, people can do a pitch and say, 'I want to start a red pepper farm' or 'I need to buy a wheelbarrow,' and they'll make a pitch to the group and the group will say 'this is what we think we should fund at this repayment rate'. And it keeps going like that," said Sriram. Groups typically loan to an average of three people at a time. Loan repayment is surprisingly successful. "We generally have a 99% repayment rate on loans. Is there a bank in the world that can say that? This is why solidarity is so important. That trust is basically what engenders the stability of the group," Sriram explains. Nguyen Thi Kieu Trang, the marketing and communica- tions manager for CARE in Vietnam, shared with STiR the re- sults from a recent case study conducted in Vietnam's Son La and Dien Bien provinces. "Qualitative respondents appreciate that the loan is quick, unlike other financial institutions with longer processes. Re- spondents said that when they face challenges such as crop pro- duction failure or animal disease, they urgently rely on the VSLA loan to access financial support, given the fact that VSLA loan supports multiple purposes. The easy cash access and multiple- purpose loans are important to clarify why VSLA serves as an informal social security fund." A VSLA member from Den Village in Son La province receiving a loan. Photo courtesy Bai Quoc Ky/CARE A survey of VSLA members in Vietnam discovered that more than half of the loans were spent on household production and business expansion. The multiple-purpose loans provide swift relief in times of urgent need. CARE USA's senior director for VSLAs, Vidhya Sriram, visiting a savings group in Malawi. Photo courtesy CARE 0% 10% 20% 30% 40% 50% 60% Vietnam VSLAs Case Study Household production and business expansion Daily living expenses (food, electricity, water, and consumer goods) Children's education (study materials, tuition, uniforms, and supplies) Healthcare for VSLA members or their family Loan Expenditure

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