Lessons learned: how to set up a village savings and loan association

After it generated more than an average 40% return on investment for savers, showed evidence of benefits for women and reducing tension between ethnic groups, we are scaling up our pilot village savings and loans association (VSLA) programme in the isolated, conflict-affected region of South Kivu, in the Democratic Republic of Congo (DRC).

Despite our successes, the pilot didn’t run perfectly, so we want to share what we learned in the hope it might be useful for other NGOs entering this field with little or no prior experience in running VSLAs.

Research and observe

We spent a long time researching different microfinance and microcredit models before opting to explore the VSLA model after concerns about the overheated income-generation claims associated with microfinance. We reminded ourselves that our goal was to include the most disadvantaged groups in the region, people without assets for security, access to social relations, markets and financial literacy.

Savings and loans models were the best option, but we knew there was an “off-the-shelf” attitude to this approach. In order to avoid this, we spoke with colleagues at Care International and got in touch with Hugh Allen, one of the first people to realise the potential of the VSLA model in the 1970s. Allen linked us to Burundi NGO Dutabarane who run a VSLA and we organised a visit with our local Congolese partners. Having the opportunity to visit local VSLA groups cannot be underestimated – as with many complex programmes, it is only through observation and discussion with participants that one starts to gain a greater understanding of how the ideas can transfer to a different context.

Recruit the right team

The major expenditure related to VSLAs is staff costs. Unexpectedly, we found the appointment of three good field agents (FAs) more important than a strong team leader. The FAs need to have expert knowledge of local power dynamics, and be able to gain the respect and trust of local communities. However, as VSLAs are self-managed, they must also be able to guide rather than impose. Interestingly, we found that recruiting those with too much local influence can result in an awkward power dynamics.

For example, we recruited a well-educated, very thoughtful and well-connected local man who also happened to be a customary chief (local leader).In hindsight, he shouldn’t have been recruited – his role as leader came before his VSLA work. It created a hierarchy with VSLA members defaulting to him, rather than feeling comfortable in their own leadership. The other two FAs were younger, from the area, but with no customary leadership roles. The dynamics of these groups were much better.Tap into the VSLA community

There is a global VSLA community – tap into it. VSL Associates and Savings Groups are the two major VSLA platforms – on these you will find ready-made training materials and online discussion groups. Seek out local VSLA programmes and see if you and your project team can visit them too.

Take a patient, open approach

We stuck very rigidly to the pure VSLA approach, but when we realised the pilot was taking longer than we had planned, we extended the time limit, rather than rushed to complete before we were ready. Our communities have coped with conflict and displacement, so are very resilient and are used to living with little or no state support, but it still needs to be clear what is expected of all parties. When we visit groups there is still often a request for us to ‘help’ by topping-up the kitty. This underlines the importance of open dialogue right from the beginning.

Dedicate time and money to monitoring, evaluation and learning

Because we wanted to track not just economic and membership data but impact on nutrition, shelter, education, health, women’s empowerment and social status, - monitoring, evaluation and learning has been the heaviest time burden on the team. It definitely needs to be planned and budgeted for.

Scaling up, we have invested in an assistant team leader to support this process. But as field agents built up excellent relationships with VSLA members, the learning gleaned is second to none. Qualitative assessment produced the real surprises, showing there was a consistent shift away from men dominating household decision making to joint decision making between husband and wife. The social benefits of the VSLAs in terms of social cohesion and intra-communal solidarity also seemed to carry as much weight as the financial benefits. And curiously, social norms of who owns livestock, particularly cows, appear to be breaking down, with women and non-Banyamalenge groups (the traditional cow owners) aspiring to own cows.

Getting feedback from participants also has showed us that we previously had a very limited view of how people manage their financial affairs on the plateau. Other credit and perhaps savings arrangements exist within the communities, and the key thing next is to understand is how VSLAs can improve the process of managing and planning complex lives, rather than imagining VSLAs replace them because they are better. What was our impact?

Social impact is a notoriously tricky area to measure, and we feel we have only just started to scratch the surface through the findings mentioned above. How did our pilot compare to the performance of VSLAs elsewhere? This is difficult to say. Pilots tend to be more resource and support intensive, and perhaps coax out better performance than full scale programmes.

We know that there is a conditional VSLA programme also currently in the region that is linked to sending orphans to school. This is not a direct comparison to ours. We had toyed with the idea of explicitly linking the VSLAs to child wellbeing and education, since this reflects our mission as an organisation, but concluded pilots need to be stripped of unwarranted assumptions and external demands.

Amy Parker is former programme manager for the DRC and Burundi and Koy Thomson is chief executive at Children in Crisis. Follow them on Twitter @ChildrenCrisis

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