The Village Savings and Loan Association

Why the VS&L Model?

The Village Savings and Loan (VS&L) Model is a methodology created by Hugh Allan and Mark Steghle of VSL Associates. When individuals are too poor to meet even a microfinance institution’s minimum or when individuals may be too scared of financial institutions in general, step in VSLA! This model can reach those that MFI institutions cannot reach and can further complement those that are already clients with MFIs.

Purpose

In essence, the VSLA groups receive and provide three services:

-Regular savings

-Access to capital

-Emergency funds in case of sickness or death in the family

The Logistics

Members choose a share amount and at each meeting, members buy between 1-5 shares. The shares in turn serve as capital for the group when a member would like to take a loan. That member will then reimburse the loan with a service fee that the group chooses.. The group can also choose to implement fines when somebody is late, absent, etc. At the end of each cycle, each member receives the shares that they have saved along the profit from the fees.

PCV Jessie Warning with a VS&L group, Femmes de Base

Real-Life Scenario

For example, one women’s group I work with has a share amount of 500CFA (equivalent to $1US). During one meeting, a women could decide to buy 1000CFA ($2US) worth of shares and the next week, she could choose to only save 500CFA. The money stays inside a wooden cash box along with each members’ notebook of transactions. At another meeting, the same woman can take out a 25,000CFA ($50US) loan to help augment her tailoring business. She would then pay that loan back with the service fee each month (in this group’s case, 10%). At the end of the year, each part will grow depending on the fees collected. Each part for this group could very well be 700CFA, thus for every 500CFA share the woman saved, she will receive 700CFA.

One of the best parts of the VSLA model is that in essence, it requires no outside funding and the groups have the potential to become self-sufficient and sustainable. I have inherited 11 groups from my PCV predecessor and will create more VSLA groups in the future!