MICROCAPITAL BRIEF: Village Savings and Loan Associations Featured in The Economist as “Hottest Trend in Microfinance”

A recent article in British weekly news magazine The Economist featured village savings and loan associations (VSLA), describing them as the “hottest trend in microfinance.” According to the article, while many microfinance institutions have expanded their outreach to poor people over the last decade, these institutions still do not find some communities to be attractive markets. In addition, poor people are often wary of racking up debt.

In a typical VSLA, the generic name for which is “savings group,” members pool their savings, buy a share in a fund from which they can borrow and contribute to a social fund, which acts as a form of microinsurance. At the end of a set period of time, all the money accumulated is distributed according to members’ contributions. Nonprofit organizations such as CARE International, Plan International, Oxfam US, Catholic Relief Services and the Aga Khan Foundation have promoted such schemes, which have now spread to an estimated 4.6 million members in 54 countries.

By Kristha Abores, Research Associate

About CARE International:
CARE International (CARE) is a Switzerland-based non-governmental organization with global poverty reduction programs aimed at developing women’s economic capabilities. Founded in 1945 with the aim of sending supplies to post-war Europe from America, it has evolved into a multipurpose humanitarian organization. As of June 30, 2010, CARE reportedly supported 905 projects in 87 countries that reached 82 million people. That year it reported total assets of EUR 592 million (USD 782 million).

About Plan International:
Plan International is a UK-based children’s development organization that was founded in 1937. As of 2010, it works in 48 developing countries across Africa, Asia and the Americas with the goal of promoting child rights and lifting children out of poverty. As of June 30, 2010, Plan International reported total assets of EUR 317 million (USD 413 million) with an annual net income of EUR 79 million (USD 103 million).

About Oxfam International:
Oxfam International was established in 1995 as a confederation of 15 organizations working to reduce poverty. Oxfam’s name is derived from its founding member, the Oxford Committee for Famine Relief, which began operating in Britain in 1942 by advocating for food supplies to be sent to women and children in Greece during the Second World War. Oxfam International since has grown into a network of member organizations serving 99 countries with disaster relief, advocacy and policy research with the aim of providing long-term solutions for poverty eradication. As of March 2010, Oxfam International reports GBP 2.4 million (USD 3.9 million) in assets.

About Oxfam America:
Based on Boston, Massachusetts, Oxfam America is a part of Oxfam International, a confederation of 15 organizations working to reduce poverty. Oxfam America works on issues such as community finance, private sector engagement, food security and rural resilience. As of October 2010, Oxfam America reported total assets of USD 98.8 million.

About Catholic Relief Services:
Established in 1943, Catholic Relief Services (CRS) is an international humanitarian agency founded by the Catholic Bishops of the United States to serve World War II survivors in Europe. It has since expanded to assist impoverished and disadvantaged people in 100 countries. CRS provides emergency relief and long term development services to ensure that people have access to basic necessities, health care and education. As of September 2010, CRS reported total assets of USD 482 million.

About Aga Khan Foundation:
Part of the Aga Khan Development Network (AKDN), Aga Khan Foundation Canada (AKFC) is an international nonprofit agency that supports social development programs in Asia and Africa. Founded in 1980, AKFC aims to find and implements solutions to the root causes of poverty. As of December 2011, AKFC supports 25 initiatives in Africa and Asia that involve microfinance, health and education.

About Aga Khan Development Network:
The Aga Khan Development Network (AKDN) is a group of development agencies with mandates that include the environment, health, education, architecture, culture, microfinance, rural development, disaster reduction, the promotion of private-sector enterprise and the revitalisation of historic cities. AKDN has subsidiaries in 23 countries around the world.

Sources and Additional Resources:

[1] The Economist: “Small wonder: A new model of microfinance for the very poor is spreading,” http://www.economist.com/node/21541429

“AKF Savings Groups Learning Initiative,” http://www.akfc.ca/images/pubs/India_85x11_LR.pdf

MicroCapital.org article, April 4, 2011, “MICROCAPITAL BRIEF: Barclays Joins ‘Business Call to Action’ Initiative, Commits to Linking 60,000 Members of African ‘Banking on Change’ Village Savings and Loan Associations to Traditional Bank Accounts,” https://www.microcapital.org/microcapital-brief-barclays-joins-%E2%80%98b

MicroCapital.org article, August 27, 2010, “MICROCAPITAL BRIEF: Barclays Commits $50m to African Microfinance Groups Including Village Savings and Loan Associations,” https://www.microcapital.org/microcapital-brief-barclays-commits-50m-to-a

MicroCapital Universe Profile: CARE International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CARE+International

MicroCapital Universe Profile: Plan International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Pla…

MicroCapital Universe Profile: Oxfam International, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Oxf…

MicroCapital Universe Profile: Oxfam America, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Oxfam+America

MicroCapital Universe Profile: Catholic Relief Services, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Catholic+Relief+Services

MicroCapital Univers Profile: Aga Khan Foundation Canada, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Aga…

MicroCapital Univers Profile: Aga Khan Development Network, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Aga+Khan+Development+Network

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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