Village Savings and Loan Association in Malawi

Village Savings and Loan Association in Malawi

Innovations for Poverty Action (IPA) is conducting an ongoing project that implements Village Savings and Loan Associations (VSLA) in rural poor communities in Malawi. The goal of this project is to create a system that was self-sustainable and self-replicating and would allow community members to embrace the concept of credit and save to generate financial security. The communities in this study already had savings groups established that followed the ROSCA model. This savings group model proved to be ineffective in the community because members could not withdraw from the funds as needed, rather they could only borrow money when it was their turn in the rotation. To provide for a sustainable group and offer members greater access to funds and credit the IPA implemented a new type of savings group following the VSLA model. This model allows members to withdraw a loan at will and to build credit. The IPA used trained field officers to host meetings within the communities to educate members about the workings of the VSLA and to aid with the start up of the savings group. Although results of this program are still forthcoming, the model used in this project was helpful in guiding the team with potential savings group plans (Karlan and Thuysbaert 2011).