By Morgan Merge, CED volunteer
Every Thursday in the village of Avrankou just 10 km north of capital city, Porto Novo, I meet with 19 women for a Village Savings and Loan Association (VSLA) meeting. The VSLA is a very simple and informal savings account. Once a week for eight months, each woman puts at least 200 CFA, which is about $.35, in a lockbox that she wishes to save. This money accumulates over time and is available to any member of the association who may need a loan during this period. She can borrow it from the safe as long as she repays it at an interest rate determined by the group. At the end of the eight-month cycle, each woman will receive the money she has put in the safe as well as a portion of the interest paid on the loans.
Since last July, my local counterpart and I have established several VSLAs in neighboring villages, and the VSLA in Avrankou is what I would consider the most successful among them. My counterpart, who is a director of a local NGO that supports women’s and children’s rights, has worked with these women in Avrankou for several years. He knew they would greatly benefit from a VSLA since most of the women either never went to school or left when they were very young, and they typically live hand-to-mouth. This becomes a problem whenever there are big household expenses, like at the beginning of the school year when school fees are due. With little or no financial support from their spouses, they are forced to make spending cuts to their already meager budgets to make ends meet. Their low income and lack of formal education makes them ineligible for loans from banks or microfinance institutions, and most wouldn’t be able to afford the high interest rates, anyway.
The VLSA mitigates these problems and gives the women of the group more financial freedom. First and foremost, it provides them an opportunity to save money. Every member must save each week, and the women considered everyone’s financial situation when choosing the minimum weekly savings amount. Most plan on using their savings to pay for their children’s school fees. Second, they can borrow from these savings and repay the loan at an affordable interest rate. So far, 10 women have taken loans of 10,000 CFA, which is about $16, and repaid each loan with 5% interest. They have all used their loans to invest in their business affairs. Lastly, this interest gets shared among everyone at the end of the savings cycle, so they are essentially earning money from their savings.
These 19 women not only have access to financial services they normally wouldn’t have, but they have also learned invaluable accounting and budgeting skills through the VSLA. The group is entirely self-run; my counterpart and I attend the weekly meetings solely for support and to answer questions. The women are in charge of tracking their savings, calculating loan interest, and enforcing the rules that they established. Furthermore, as I mentioned above, it is mandatory that members save every single week, so everyone has to create a weekly budget to ensure they can meet this requirement. The skills acquired through the VSLA will help them better manage their business affairs and personal finances, which will ultimately put more money in their pockets and allow them to live comfortably year-round.