Why Village Savings and Loan Associations work better for Plant With Purpose

While in Haiti I visited several of our 76 Haitian VSLA groups.  After first using this system in Tanzania in 2006, we have gradually adopted it throughout our programs, phasing out all of our more traditional microcredit work.  Like many of our country directors, I was skeptical at first, but began to see why, for us, it was a much better system.  It has been nothing short of revolutionary.  Here are just some of the ways it has been better.

  • Sustainable – VSLA groups are more sustainable than traditional microfinance. In a traditional system we would need to stay in the community and be the banking institution for the foreseeable future. In VSLA, the community fulfills that function themselves. This allows us to truly graduate communities.
  • Conducive to Relationships – It changes the relationship with our staff. No longer are they seen as the loan collectors, to be avoided or feared. Instead they are freed up to offer training, empowerment and ministry to the community members.  I have often characterized this as moving from collection agents to coaches.
  • Low Cost – The cost per client is far lower, especially in a rural setting, making it more cost effective when working with very poor clients. Thus we can impact far more clients for the same price.
  • Repayment Rates are Higher and Loans Easier to Collect – Because the money comes directly from the community, they take repayment much more seriously than they would if it came from a foreign or even local NGO.
  • Encourages Mutual Support – Because the success or failure of someone’s business directly impacts the return on the savings of all the other members, group members will often come alongside borrowers to ensure their business ventures succeed.
  • Empowering I – The interest accrues to the savings accounts of the group members rather than paying for the overhead of the institution. Hence more money and benefit remain in the community.
  • Empowering II– People see the money as something they have raised and become very excited at realizing their power. The testimony from the communities as they realize these are assets that they have had all along is absolutely amazing. New groups are often forming faster than we can train them.
  • Builds Leadership – Since the communities run the system, many more community members get to exercise leadership than in a traditional system.
  • Provide Savings – For the very poorest and for the less entrepreneurial a secure place to save money is of far more immediate use than a loan.
  • Foster Good Habits I – Many farmers experience only one or two “paydays” per year, so without a good place to save that money, it is often spent on the lottery, alcohol or put to other even less desirable uses.
  • Foster Good Habits II – Small fines keep members attentive and coming to meetings on time. This has dramatically affected behavior outside of the groups as well.
  • Provide a Platform for Further Training – The tight knit groups that we work with also provide a perfect platform for teaching agriculture and business skills.

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