How VSLA groups work?
In this article we are going to chronically demonstrate how a VSLA group function. It is basically the idea of saving as groups of multiple participants and receiving a loan as individuals so that every member in the group receives at least one loan in every annual cycle.
Community is oriented to the VSLA concept.
Individuals opt to join a group and identify their own members (typically 15-25
Members trained on group governance and management. They receive a
lockbox with three locks and three keys, and passbooks for recording
Group establishes a constitution and bylaws, including meeting frequency, rules and regulations.
Group elects a chairperson, secretary and treasurer for a one-year term.
Group sets the price per share and the minimum/maximum number of shares a member can purchase during a meeting.
Group begins saving on a weekly basis and is trained on financial management.
Group adds lending to the routine, making loans to members and collecting
repayments with interest (a 10% monthly rate is typically applied to loans).
After 9-12 months, groups hosts “Share-Out Day,” ending the cycle and distributing savings and profits to members according to the number of shares each has purchased during the cycle.
Most groups quickly initiate a new cycle autonomously.
Timeline of CARE’s saving method movement
VSLA has entered into the third decade of existence and so far has achieved great success in generating local development in poor and vulnerable communities.
. Furthermore it has empowered many women across the world to become economically independent. First begun in 1991 in Niger, you can follow the timeline of CARE’s VSLA movement:
CARE pioneers the VSLA concept in Niger as a means of empowering women to pool their savings, then loan one another money to start small businesses or pay for important life expenses. Those original groups were called Mata Masu Dubara, “Women on the Move.”
VSLAs expand beyond Niger for the first time, into Mozambique. They have since spread to 26 countries in Africa and 9 countries beyond the continent. VSLAs were a key piece of CARE’s program to help Haitians rebuild their country after the 2010 earthquake, for instance. And they have taken root in Afghanistan, where groups apply service fees instead of interest, which is forbidden under Islamic law.
World Vision becomes the first peer organization to adopt CARE’s VSLA model. Others followed suit. As a result, more than 10 million people are engaged in VSLAs and groups like them across Africa.
CARE takes VSLA to East Africa, introducing it in Zanzibar and then mainland Tanzania before scaling across the region. The region today hosts more groups and members than any other.
CARE VSLA membership crosses the 1 million-person mark.
CARE launches Access Africa — a signature initiative focused on massively scaling VSLAs and access to a suite of financial services across the continent.
Barclays, CARE and Plan International launch the first partnership between a global bank and non-profit organizations dedicated to linking savings groups to formal financial services. VSLA success story Goretti Nyabenda of Burundi appears on the cover of the New York Times magazine with the headline “Why Women’s Rights Are the Cause of Our Time.”
Niger’s Mata Masu Dubara organizes a national convention in Niamey, Niger, where hundreds of VSLA members across the country gather to discuss how to better assert their political influence.
CARE launches a firstof- its-kind partnership that uses mobile phone technology to link VSLA groups with formal banks.
Former U.S. President Bill Clinton tours the Tanzanian neighborhood where the Banking on Change program was introduced as a joint effort among CARE, Plan and the Clinton Global Initiative.
Existing networks of VSLAs expand in Liberia and Sierra Leone during the Ebola outbreak, as people see firsthand how savings groups become safety nets and critical information sources. CARE VSLAs surpass 4 million members.
CARE and Visa pilot a mobile app allowing VSLA members to record financial transactions so they can
establish a credit history and qualify for loans. CARE VSLAs surpass 5 million members.
There are 1.1 billion “unbanked” women in the world without resources to financial services and credit. CARE’s experience has shown that those participating in VSLAs are more than ready for formal banking services. As VSLA groups mature, so grows their need for more diverse financial services like insurance and a more secure place to keep their savings and extra cash. Demand for larger and longer-term loans also increases, particularly at the beginning of a group’s cycle, when savings are minimal. To fill these gaps, VSLA groups increasingly need to link with formal banks. And CARE is making that happen. The payoffs can be significant. Once linked with a bank, group member savings increase between 40 percent and 100 percent, and the average profit per member doubles. It is through these linkages that CARE will map the next frontier of VSLAs. We can give you more than a billion reasons to join us.
You can contribute directly to CARE for covering operational expenses associated with developing VSLA. Some main expenditures are as follows:
supplies a VSLA start-up kit, including a
savings lockbox and ledgers.
buys a bike so a CARE agent can travel among
villages to train residents on the VSLA model.
funds the organization and training of one
CARE Village Savings & Loan Association, which
will financially empower marginalized women.
Donate today at gifts.care.org
And also make sure to Visit care.org to learn
more about CARE’s efforts to economically empower women.
The poverty-fighting organization CARE announced a Commitment to Action today at the Clinton Global Initiative (CGI) Annual Meeting to link 500,000 women to formal financial services across Africa and parts of Asia by 2020. CARE joins No Ceilings: The Full Participation Project, an initiative of the Clinton Foundation, Vital Voices Global Partnership, WEConnect International, and a coalition of over 30 core partners from the public, private, and multilateral sectors to address significant gender gaps and advance the gender equality targets of the United Nations’ Sustainable Development Goals.
This commitment is part of a larger CARE initiative to economically empower 30 million women by 2020. It comes as CARE celebrates the 25th anniversary of its signature innovation in microfinance: Village Savings and Loan Associations, or VSLAs, whereby groups of 20 to 30 people save money together, earn interest and give each other loans. Since CARE pioneered the community-led concept in Niger in 1991, more than 200,000 CARE VSLAs have formed with more than 5 million members, nearly 80 percent of whom are women.
“For the past quarter-century, we’ve seen the impact Village Savings and Loan Associations have in the lives of women and communities around the world,” said Michelle Nunn, president and CEO of CARE. “As these groups mature, so do their financial needs, and it is through the formal financial sector that they can take an even bigger leap away from poverty and toward a better future. Our commitment at the Clinton Global Initiative will give half a million women that opportunity. We are proud to join a coalition of partners working to advance women’s rights and opportunities around the world.”
A combination of factors, including access, affordability and women’s unique financial needs, create barriers to formal financial services for 1.1 billion women across the globe. In an effort to break through those barriers, CARE in recent years has engaged banks and mobile network operators to drive VSLAs’ growth beyond informal finance and, often for the first time, into formal financial services. In doing so, CARE works closely with partners to build a more complete financial ecosystem that includes multi-national and community banks, credit unions, digital service providers and mobile networks. The benefits are substantial. One report co-authored by CARE indicates that, once linked to a bank, group members’ savings increase 40 percent to 100 percent. And profit per VSLA member doubles, putting more money in the hands of people to invest in their futures.
With the CGI commitment, CARE will strengthen that foundation, extending the model to at least five new countries (Burundi, Niger, Vietnam, Bangladesh, Cambodia) and scaling up efforts in seven current markets (Kenya, Tanzania, Uganda, Rwanda, Cote d’Ivoire, Ghana, Ethiopia). Wherever possible, CARE will utilize digital products and social enterprise models to better meet its commitment.
Coinciding with CGI, CARE is joining UN Women and Women’s World Banking to host a Sept. 21 panel discussion where global leaders will explore what actions are necessary to achieve fast and significant progress toward financial inclusion of all women. Following the discussion, CARE will host a reception celebrating 25 years of CARE VSLAs, whose benefits go well beyond improved finances. The groups also offer a platform for improving health, accessing quality education and rebuilding after disasters.
Founded in 1945 with the creation of the CARE Package®, CARE is a leading humanitarian organization fighting global poverty. CARE places special focus on working alongside women and girls because, equipped with the proper resources, they have the power to lift whole families and entire communities out of poverty. That’s why women and girls are at the heart of CARE’s community-based efforts to improve education and health, create economic opportunity, respond to emergencies and confront hunger. Last year CARE worked in 95 countries and reached more than 65 million people around the world. To learn more, visit www.care.org.
About the Clinton Global Initiative
Established in 2005 by President Bill Clinton, the Clinton Global Initiative (CGI), an initiative of the Clinton Foundation, convenes global leaders to create and implement solutions to the world’s most pressing challenges. CGI Annual Meetings have brought together 190 sitting and former heads of state, more than 20 Nobel Prize laureates, and hundreds of leading CEOs, heads of foundations and NGOs, major philanthropists, and members of the media. To date, members of the CGI community have made more than 3,500 Commitments to Action, which have improved the lives of over 430 million people in more than 180 countries. For more information, visit clintonglobalinitiative.org and follow us on Twitter @ClintonGlobal and Facebook at facebook.com/clintonglobalinitiative.
About No Ceilings: The Full Participation Project
No Ceilings: The Full Participation Project is an initiative of the Clinton Foundation which aims to advance the full participation of girls and women around the world. Through a data-driven analysis on gender equality, an in-depth conversation series, innovative partnerships, and CGI commitments, No Ceilings builds an evidence-based case to chart the path forward for the full participation of girls and women in the 21st century. For more information, visit noceilings.org.
About Vital Voices Global Partnership
Vital Voices Global Partnership invests in women leaders who improve the world. Guided by the belief that women are essential to progress in their communities, it has partnered with leaders from more than 140 countries who advance economic opportunity, increase political and public leadership, and end violence against women. Programs in strategic planning, business, advocacy and communications build critical skills needed for creating transformational change at scale. Through its global platform, women leaders expand their connections and visibility, accelerating shared progress for all. Visit www.vitalvoices.org to learn more.
About WEConnect International
WEConnect International helps women-owned businesses succeed in global value chains. It identifies, educates, registers, and certifies women’s business enterprises based outside of the U.S. that are at least 51% owned, managed, and controlled by one or more women, and then connects them with qualified buyers. Visit www.WEConnectInternational.org to learn more.
CARE (Cooperative for Assistance and Relief Everywhere, formerly Cooperative for American Remittances to Europe) is a major international humanitarian agency delivering emergency relief and long-term international development projects. Founded in 1945, CARE is nonsectarian, impartial, and non-governmental. It is one of the largest and oldest humanitarian aid organizations focused on fighting global poverty. In 2016, CARE reported working in 94 countries, supporting 962 poverty-fighting projects and humanitarian aid projects, and reaching over 80 million people and 256 million people indirectly.
CARE’s programmes in the developing world address a broad range of topics including emergency response, food security, water and sanitation, economic development, climate change, agriculture, education, and health. CARE also advocates at the local, national, and international levels for policy change and the rights of poor people. Within each of these areas, CARE focuses particularly on empowering and meeting the needs of women and girls and promoting gender equality.
CARE International is a confederation of fourteen CARE National Members, each of which is registered as an autonomous non-profit non-governmental organization in the country and four affiliate members. The fourteen CARE National Members are CARE Australia, CARE Canada, CARE Denmark, CARE Deutschland-Luxembourg, CARE France, CARE India, CARE International Japan, CARE Nederland, CARE Norge, CARE Österreich, Raks Thai Foundation (CARE Thailand), CARE International UK, CARE USA, and CARE Peru. Programs in developing countries are usually managed by a Country Office, but CARE also supports projects and may respond to emergencies in some countries where they do not maintain a full Country Office. The four affiliates are CARE Egypt, CARE Indonesia, CARE Morocco, and Chrysalis (CARE in Sri Lanka).
1945–1949: Origins and the CARE Package
CARE, then the Cooperative for American Remittances to Europe, was formally founded on November 27, 1945, and was originally intended to be a temporary organization. World War II had ended in August of the same year. After pressure from the public and Congress, President Harry S. Truman agreed to let private organizations provide relief for those starving due to the war.  CARE was initially a consortium of twenty-two American charities (a mixture of civic, religious, cooperative, farm, and labour organizations) with the purpose of delivering food aid to Europe in the aftermath of World War II. The organization delivered its first food packages in 1946.
CARE’s food aid took the form of CARE Packages, which were at first delivered to specific individuals: Americans paid $10 to send a CARE Package of food to a loved one in Europe, often a family member. President Truman bought the first CARE package:p.1 CARE guaranteed delivery within four months to anyone in Europe, even if they had left their last known address, and returned a signed delivery receipt to the sender. Because European postal services were unreliable at the time these signed receipts were sometimes the first confirmation that the recipient had survived the war.
The first CARE Packages were in fact surplus “Ten-in-One” US army rations packs (designed to contain a day’s meals for ten people). In early 1946 CARE purchased 2.8 million of these warehoused rations packs, originally intended for the invasion of Japan, and began advertising in America. On May 11, 1946, six months after the agency’s incorporation, the first CARE Packages were delivered in Le Havre, France. These packages contained staples such as canned meats, powdered milk, dried fruits, and fats along with a few comfort items such as chocolate, coffee, and cigarettes. (Several on the CARE Board of Directors wished to remove the cigarettes, but it was deemed impractical to open and reseal 2.8 million boxes.) 1946 also marked CARE’s first expansion out of the US with the establishment of an office in Canada.
By early 1947 the supply of “Ten-in-One” ration packs had been exhausted and CARE began assembling its own packages. These new packages were designed with the help of a nutritionist. They did not include cigarettes and were tailored somewhat by destination: Kosher packages were developed, and for example packages for the United Kingdom included tea rather than coffee, and packages for Italy included pasta. By 1949 CARE offered and shipped more than twelve different packages.
Although the organization had originally intended to deliver packages only to specified individuals, within a year CARE began delivering packages addressed for example “to a teacher” or simply “to a hungry person in Europe.”:p.18 These unspecified donations continued and in early 1948 CARE’s Board voted narrowly to officially move towards unspecified donations and to expand into more general relief. Some founding member agencies disagreed with this shift, arguing that more general relief would be a duplication of the work of other agencies, but donors reacted favourably, contributions increased, and this decision would mark the beginning of CARE’s shift towards a broader mandate.
Between the first deliveries of 1946 and the last European deliveries of 1956, millions of CARE Packages were distributed throughout Europe, over 50% of them to Germany  including many delivered as part of the Berlin airlift in response to the 1948 Soviet blockade of Berlin.
The US Agricultural Act of 1949 made surplus US agricultural products available to be shipped abroad as aid either directly by the US government or by NGOs including CARE. In 1954 Public Law 480, also known as the Food for Peace Act, further expanded the availability of surplus US food as aid. This act allowed CARE to expand its feeding programs and disaster relief operations considerably, and between 1949 and 2009 CARE used hundreds of millions of dollars’ worth of surplus commodities in disaster relief and programs such as school lunch provision.
1949–1956: Transition out of Europe
Although the organization’s mission had originally been focused on Europe, in July 1948 CARE opened its first non-European mission, in Japan. Deliveries to China and Korea followed, which CARE described as aid to areas “implicated by WWII”.:p.119 In 1949 CARE entered the developing world for the first time, launching programs in the Philippines. Projects in India, Pakistan, and Mexico began soon after. 1949 also marked CARE’s first expansion into non-food aid with the development of “self-help” packages containing tools for farming, carpentry, and other trades. In 1953, because of its expansion to projects outside Europe, CARE changed the meaning of its acronym to “Cooperative for American Remittances to Everywhere”.
As Europe recovered economically, CARE faced the need to re-evaluate its mission: in 1955 several Board members argued that with the European recovery CARE’s mandate was finished and the organization should dissolve. Other Board members however felt that CARE’s mission should continue albeit with a new focus on the developing world. In July 1955 the Board of Directors voted to continue and expand CARE projects outside of Europe. Paul French, CARE’s executive director at the time, resigned over the debate. New executive director Richard W. Reuter took over in 1955 and helped lead the organization in a new direction. Twenty-two of CARE’s forty-two missions were closed, mostly in European countries, and efforts were concentrated on food distribution and emergency response in the developing world. In 1956 CARE distributed food to refugees of the Hungarian Revolution of 1956, and this would be among the last of CARE’s operations in Europe for many years
1957–1975: Transition into broader development work
With a broadened geographic focus came a broadened approach as CARE began to expand beyond its original food distribution program. In order to reflect these new broader aims, in 1959 CARE changed the meaning of its acronym a second time, becoming the “Cooperative for American Relief Everywhere”. Reflecting this broadened scope, CARE became involved in 1961 with President John F. Kennedy’s establishment of the Peace Corps. CARE was charged with selecting and training the first group of volunteers, who would later be deployed to development projects in Colombia. The Peace Corps assumed greater control over the training of Peace Corps Volunteers in subsequent missions, but CARE continued to provide country directors to the Peace Corps until CARE-Peace Corps joint projects ended in 1967.
In 1962 CARE merged with and absorbed the medical aid organization MEDICO, which it had been working closely with for several years previously. The merger considerably increased CARE’s capacity to deliver health programming including trained medical personnel and medical supplies.
During this transition the original CARE Package was phased out. The last food package was delivered in 1967 and the last tools package in 1968. Over 100 million CARE Packages had been delivered worldwide since the first shipment to France. Although 1968 marked the official “retirement” of the CARE Package the format would occasionally be used again, for example in CARE’s relief to the republics of the former Soviet Union and to survivors of the Bosnian War. The concept was also revived in 2011 as an online campaign encouraging donors to fill a “virtual CARE Package” with food aid and services such as education and healthcare.
1967 also marked CARE’s first partnership agreement with a government: for the construction of schools in Honduras. Partnership agreements with governments led programmes to become country-wide rather than targeted only to a few communities. CARE’s programmes during this era focused largely on the construction of schools and nutrition centres, and the continued distribution of food. Nutrition centres in particular would become one of CARE’s major areas of concentration, linking with school feeding programs and nutrition education aimed at new mothers.
In 1975 CARE implemented a multi-year planning system, again allowing programmes to become both broader and deeper in scope. Projects became increasingly multi-faceted, providing for example not only health education but also access to clean water and an agricultural program to improve nutrition. The multi-year planning system also increased the scope for country-wide projects and partnerships with local governments. A 1977 project for example provided for the construction of over 200 pre-schools and kindergartens throughout Chile over several years, jointly funded by CARE and the Chilean Ministry of Education.
1975–1990: From CARE to CARE International
Although CARE had opened an office in Canada in 1946, it was not until the mid-1970s that the organization truly started to become an international body. CARE Canada (initially Care of Canada) became an autonomous body in 1973. In 1976 CARE Europe was established in Bonn following the successful fund-raising campaign “Dank an CARE” (Thanks to CARE). In 1981 CARE Germany was created and CARE Europe moved its headquarters to Paris. CARE Norway had been created in 1980, and CAREs in Italy and the UK were established. The popularity of CARE offices in Europe was attributed to the fact that many Europeans remembered receiving CARE assistance themselves between 1945 and 1955.
In 1979 planning began for the establishment of an umbrella organization to coordinate and prevent duplication among the various national CARE organizations. This new body was named CARE International and met for the first time on January 29, 1982, with CARE Canada, CARE Germany, CARE Norway, and CARE USA (formerly simply CARE) in attendance.
CARE International would expand significantly during the 1980s, with the addition of CARE France in 1983; CARE International UK in 1985; CARE Austria in 1986; and CARE Australia, CARE Denmark, and CARE Japan in 1987.
1990–present: Recent history
Along with broader development work CARE’s projects in the 1980s and early 1990s focused particularly on agroforestry initiatives such as reforestation and soil conservation in eastern Africa and South America. CARE also responded to a number of major emergencies during this period, notably the 1983–1985 famine in Ethiopia and the 1991-1992 famine in Somalia.
The 1990s also saw an evolution in CARE’s approach to poverty. Originally CARE had viewed poverty primarily as a lack of basic goods and services such as food, clean water, and health care. As CARE’s scope expanded both geographically and topically this approach was expanded to include the view that poverty was in many cases caused by social exclusion, marginalization, and discrimination. In the early 1990s CARE adopted a household livelihood security framework which included a multidimensional view of poverty as encompassing not only physical resources but also social position and human capacities. As a result of this, by 2000, CARE had adopted a rights-based approach to development.
One of their buildings was attacked, and people were killed and wounded, during the September 2016 Kabul attacks.
In the early 1990s CARE also developed what would become an important model for cooperative microfinance.
This model is called the Village Savings and Loans Associations (VSLAs) and it began in 1991 as a pilot project run by CARE’s Country Office in Niger. The pilot project was called Mata Masu Dubara (MMD) and CARE Niger developed the VSLA model by adapting the model of Accumulating Savings and Credit Associations (ASCAs). VSLAs involve groups of about 15-30 people who regularly save and borrow using a group fund. Member savings create capital that can be used for short-term loans and capital and interest is shared among the group at the end of a given period (usually about a year), at which point the groups normally re-form to begin a new cycle. Because the bookkeeping required to manage a VSLA is quite simple most groups successfully become independent (needing no outside management help) within a year and enjoy a high rate of long-term group survival. CARE has created over 40,000 VSLAs (over 1 million members total) across Africa, Asia, and Latin America and in 2008 launched Access Africa which aims to extend VSLA training to 39 African countries by 2018.
The model has also been widely replicated in Africa and Asia and by other large NGOs including Oxfam, Plan International, and Catholic Relief Services.
CARE UK later launched lendwithcare.org, which allows members of the public to make microloans, including green loans, to entrepreneurs in Africa and Asia. It avoids many of the criticisms levelled at Kiva.org.
Acronym redefinition and 50th anniversary
In 1993 CARE, to reflect its international organizational structure, changed the meaning of its acronym for a third time, adopting its current name the “Cooperative for Assistance and Relief Everywhere”. CARE also marked its 50th anniversary in 1994.
CARE expanded the confederation to twelve members in the early 2000s, with CARE Netherlands (formerly the Disaster Relief Agency) joining in 2001 and CARE Thailand (called the Raks Thai Foundation) joining in 2003, becoming the first CARE National Member in a developing country.
CARE’s well-known “I am Powerful” campaign launched in the USA in September 2006 and was intended to bring public attention to the organization’s long-standing focus on women’s empowerment. CARE states that its programs focus on women and girls both because the world’s poor are disproportionately female and because women’s empowerment is thought to be an important driver of development. CARE also emphasizes that it considers working with boys and men an important part of women’s empowerment, and that women’s empowerment benefits both genders.
In 2007 CARE announced that by 2009 it would no longer accept certain types of US food aid worth some $45 million a year, arguing that these types of food aid are inefficient and harmful to local markets. Specifically, CARE announced that it would forego all monetized food aid (surplus US food shipped to charities in the developing world who then sell the food on the local market to finance development projects) and all food aid intended to establish a commercial advantage for the donor, and would increase its commitment to buying food aid locally. CARE also announced that it would no longer accept USDA food through Title 1 (concessional sales) or Section 416 (surplus disposal) because these programs are intended mainly to establish a commercial advantage for US agriculture.
In 2011 CARE added its first Affiliate Member, CARE India, and in 2012 the CI board accepted CARE Peru as CARE’s second Affiliate Member. CARE India became a full member in November 2013. The CI board accepted CARE Peru as a full member of the confederation in June 2015.
CARE is currently one of the only major NGOs to make their database of project evaluations publicly available, and to regularly conduct a meta-analysis of evaluation methodologies and overall organizational impact.
Presidents of CARE
Clarence Picket, temporary chairman 1945
Murray Lincoln, President 1945 – 1957
Harold S. Miner, President 1957 – 1978 
CARE currently takes care of variety of issues, that range from cleaning up disaster stricken places to work on curing AIDS.
CARE International is a confederation of fourteen CARE National Members, coordinated by the CARE International Secretariat. The Secretariat is based in Geneva, Switzerland, with offices in New York and in Brussels in order to liaise with the United Nations and the European institutions respectively.
Each CARE National Member is an autonomous non-governmental organization registered in the country, and each Member runs programs, fundraising, and communications activities both in its own country and in developing countries where CARE operates. There are fourteen National Members. The fourteen CARE National Members are:
CARE supports emergency relief as well as prevention, preparedness, and recovery programs. In 2016, CARE reportedly reached more than 7.2 million people through its humanitarian response.CARE’s core sectors for emergency response are Food Security, Shelter, WASH and Sexual & Reproductive Health. CARE is a signatory of major international humanitarian standards and codes of conduct including the Code of Conduct for the International Red Cross and Red Crescent Movement and NGOs in Disaster Relief, the Sphere standards, and the Humanitarian Accountability Partnership (HAP) principles and standards.
Over 70% of people in emerging markets do not have a formal bank account (Goss, Mas, Radcliffe, & Stark, 2011). Despite exclusion from what we consider formal banking, many people in emerging markets have figured out their own ways to save money. An increasing number of people are participating in informal savings groups.
Our goal in this series is to explore the effectiveness of savings groups. In this post, we’ll explain how they work and what the existing benefits are. Next week, we’ll explore their inefficiencies and ways the increasing availability of mobile money services can provide the opportunity to make them more effective.
What is an Informal Savings Group?
An informal savings group is a social organization formed to help community members save money for specific purposes (either individual or community level). The two most common examples are Rotating Savings and Credit Associations (ROSCAs) or Accumulated Savings and Credit Associations (ASCAs). ROSCAs function by taking monthly deposits from each member of a group and then giving the whole monthly sum to one member of the group. The recipient of the monthly sum is based on a predetermined rotation, ensuring each participant will eventually receive a large payout. ASCAs also require group members to make regular contributions. Instead of rotating payouts, the ASCA group fund is used to make loans that are paid back with interest. Loans are made either to group members or trusted third parties. After a certain period of time (often six months to a year) the group fund and its proceeds from interest are paid back to the original members.
How Informal Savings Groups Work
Groups have different names and missions across countries. In South Africa, for example, you’ll find makgotlas for funeral expenses or stokvels for group purchasing or community entertainment. In Kenya, you’ll often find groups designed to save for a large investment that benefits the community, usually investing in a business or the Nairobi Stock Exchange.
Regardless of the name or purpose, most groups have a similar structure and protocol. Members are required to make a small monthly contribution to the community fund. Groups usually have 15-20 members and are governed by a strict set of rules, either written or unwritten, depending on the group’s literacy. Breaking the rules is considered “taboo” and comes with social repercussions and possible financial penalties.
According to FinMark Trust’s FinScope survey, there were roughly 37 million people participating in some kind of informal savings group in East Africa as of 2009. In West Africa, Nigeria alone had nearly 41 million people participating in such groups (Napier, 2009). The value these individuals gain from participation in a savings group includes both tangible economic benefits as well as intangible social benefits.
How Do Informal Savings Groups Provide Economic Benefits to Their Members?
Reducing Pressures on Free Cash
In emerging markets, an individual’s cash flows are highly uneven and cash on hand is subject to the pressures of family members and friends. Women in particular find that control over their money is limited, too often due to a frivolous or alcoholic husband. These circumstances make it nearly impossible to save a sum of money large enough to invest in a piece of equipment that would improve a business, purchase materials for home improvement, or make any other large purchase to increase quality of life. Savings allows members to shed the pressure placed on their free cash by husbands, neighbors, and friends. Ultimately, this enables people to commit their surplus cash towards future purchases with the potential to improve their quality of life.
Enabling Access to Funds for Unexpected Life Events or Large Purchases
Having access to a financial savings tool makes it possible to access to a pool of capital in case of emergencies or save money for a large purchase. In case of unforeseen illness, members can rely on their group members and the resulting group fund to quickly take out a loan. Ultimately, group members have to repay the loans or end up contributing the same amount over twelve months as if they had saved the money themselves, but participating in a group creates additional flexibility and builds a social structure that creates discipline. Such discipline also enables members to save up for large purchases, since the cash is safely put away for extended periods.
The Importance of Social Capital to Informal Savings Groups
Informal savings groups in South Africa provide fascinating insight on the importance of social capital to group members. South Africa has the most developed formal banking sector in sub-Saharan Africa, where 63% of the country has access to formal banking as of 2011 (Khumalo, 2011). Yet, surveys have shown that nearly 90% of members that save primarily through ISGs also have a formal savings account (Irving, 2005). These members choose to participate in an informal savings group because the social structure it provides creates benefit that cannot be realized by saving at a bank. There are three key benefits that the group’s social structure creates:
Disciplined Saving: As mentioned briefly above, involvement in a group forces members to set savings goals and meet them each month. The negative repercussions (both economic and social) associated with failing to meet these goals create significant incentive to meet the monthly commitment. Maintaining this level of discipline is much more difficult as an individual, making group membership more appealing.
Increasing the Strength of Social Networks: Working together towards the same financial goal as part of a group that meets each month creates strong bonds. It is common knowledge in the Western world that you are more likely to get a job if referenced to a potential employer by someone you both know. This principle works the same way in the developing world. Individuals are able to leverage other members of the group to further create opportunities for themselves.
It’s Fun: It is important not to forget the human aspect of informal savings groups. Groups are formed with trusted friends or family and can often be a perfect excuse to get together once a month to socialize. Beyond just the economic opportunities, savings groups also offer a more enjoyable way to save money in comparison to simply visiting a stuffy bank branch to make a deposit.
IN THE 19TH CENTURY, the paramount moral challenge was slavery. In the 20th century, it was totalitarianism. In this century, it is the brutality inflicted on so many women and girls around the globe: sex trafficking, acid attacks, bride burnings and mass rape.
Yet if the injustices that women in poor countries suffer are of paramount importance, in an economic and geopolitical sense the opportunity they represent is even greater. “Women hold up half the sky,” in the words of a Chinese saying, yet that’s mostly an aspiration: in a large slice of the world, girls are uneducated and women marginalized, and it’s not an accident that those same countries are disproportionately mired in poverty and riven by fundamentalism and chaos. There’s a growing recognition among everyone from the World Bank to the U.S. military’s Joint Chiefs of Staff to aid organizations like CARE that focusing on women and girls is the most effective way to fight global poverty and extremism. That’s why foreign aid is increasingly directed to women. The world is awakening to a powerful truth: Women and girls aren’t the problem; they’re the solution.
“My sister-in-law made fun of me, saying, ‘You can’t even feed your children,’ ” recalled Saima when Nick met her two years ago on a trip to Pakistan. “My husband beat me up. My brother-in-law beat me up. I had an awful life.” Saima’s husband accumulated a debt of more than $3,000, and it seemed that these loans would hang over the family for generations. Then when Saima’s second child was born and turned out to be a girl as well, her mother-in-law, a harsh, blunt woman named Sharifa Bibi, raised the stakes.
“She’s not going to have a son,” Sharifa told Saima’s husband, in front of her. “So you should marry again. Take a second wife.” Saima was shattered and ran off sobbing. Another wife would leave even less money to feed and educate the children. And Saima herself would be marginalized in the household, cast off like an old sock. For days Saima walked around in a daze, her eyes red; the slightest incident would send her collapsing into hysterical tears.
It was at that point that Saima signed up with the Kashf Foundation, a Pakistani microfinance organization that lends tiny amounts of money to poor women to start businesses. Kashf is typical of microfinance institutions, in that it lends almost exclusively to women, in groups of 25. The women guarantee one another’s debts and meet every two weeks to make payments and discuss a social issue, like family planning or schooling for girls. A Pakistani woman is often forbidden to leave the house without her husband’s permission, but husbands tolerate these meetings because the women return with cash and investment ideas.
Saima took out a $65 loan and used the money to buy beads and cloth, which she transformed into beautiful embroidery that she then sold to merchants in the markets of Lahore. She used the profit to buy more beads and cloth, and soon she had an embroidery business and was earning a solid income — the only one in her household to do so. Saima took her elder daughter back from the aunt and began paying off her husband’s debt.
When merchants requested more embroidery than Saima could produce, she paid neighbors to assist her. Eventually 30 families were working for her, and she put her husband to work as well — “under my direction,” she explained with a twinkle in her eye. Saima became the tycoon of the neighborhood, and she was able to pay off her husband’s entire debt, keep her daughters in school, renovate the house, connect running water and buy a television.
“Now everyone comes to me to borrow money, the same ones who used to criticize me,” Saima said, beaming in satisfaction. “And the children of those who used to criticize me now come to my house to watch TV.”
Today, Saima is a bit plump and displays a gold nose ring as well as several other rings and bracelets on each wrist. She exudes self-confidence as she offers a grand tour of her home and work area, ostentatiously showing off the television and the new plumbing. She doesn’t even pretend to be subordinate to her husband. He spends his days mostly loafing around, occasionally helping with the work but always having to accept orders from his wife. He has become more impressed with females in general: Saima had a third child, also a girl, but now that’s not a problem. “Girls are just as good as boys,” he explained.
Saima’s new prosperity has transformed the family’s educational prospects. She is planning to send all three of her daughters through high school and maybe to college as well. She brings in tutors to improve their schoolwork, and her oldest child, Javaria, is ranked first in her class. We asked Javaria what she wanted to be when she grew up, thinking she might aspire to be a doctor or lawyer. Javaria cocked her head. “I’d like to do embroidery,” she said.
As for her husband, Saima said, “We have a good relationship now.” She explained, “We don’t fight, and he treats me well.” And what about finding another wife who might bear him a son? Saima chuckled at the question: “Now nobody says anything about that.” Sharifa Bibi, the mother-in-law, looked shocked when we asked whether she wanted her son to take a second wife to bear a son. “No, no,” she said. “Saima is bringing so much to this house. . . . She puts a roof over our heads and food on the table.”
Sharifa even allows that Saima is now largely exempt from beatings by her husband. “A woman should know her limits, and if not, then it’s her husband’s right to beat her,” Sharifa said. “But if a woman earns more than her husband, it’s difficult for him to discipline her.”
WHAT SHOULD we make of stories like Saima’s? Traditionally, the status of women was seen as a “soft” issue — worthy but marginal. We initially reflected that view ourselves in our work as journalists. We preferred to focus instead on the “serious” international issues, like trade disputes or arms proliferation. Our awakening came in China.
After we married in 1988, we moved to Beijing to be correspondents for The New York Times. Seven months later we found ourselves standing on the edge of Tiananmen Square watching troops fire their automatic weapons at prodemocracy protesters. The massacre claimed between 400 and 800 lives and transfixed the world; wrenching images of the killings appeared constantly on the front page and on television screens.
Yet the following year we came across an obscure but meticulous demographic study that outlined a human rights violation that had claimed tens of thousands more lives. This study found that 39,000 baby girls died annually in China because parents didn’t give them the same medical care and attention that boys received — and that was just in the first year of life. A result is that as many infant girls died unnecessarily every week in China as protesters died at Tiananmen Square. Those Chinese girls never received a column inch of news coverage, and we began to wonder if our journalistic priorities were skewed.
A similar pattern emerged in other countries. In India, a “bride burning” takes place approximately once every two hours, to punish a woman for an inadequate dowry or to eliminate her so a man can remarry — but these rarely constitute news. When a prominent dissident was arrested in China, we would write a front-page article; when 100,000 girls were kidnapped and trafficked into brothels, we didn’t even consider it news.
Amartya Sen, the ebullient Nobel Prize-winning economist, developed a gauge of gender inequality that is a striking reminder of the stakes involved. “More than 100 million women are missing,” Sen wrote in a classic essay in 1990 in The New York Review of Books, spurring a new field of research. Sen noted that in normal circumstances, women live longer than men, and so there are more females than males in much of the world. Yet in places where girls have a deeply unequal status, they vanish. China has 107 males for every 100 females in its overall population (and an even greater disproportion among newborns), and India has 108. The implication of the sex ratios, Sen later found, is that about 107 million females are missing from the globe today. Follow-up studies have calculated the number slightly differently, deriving alternative figures for “missing women” of between 60 million and 107 million.
Girls vanish partly because they don’t get the same health care and food as boys. In India, for example, girls are less likely to be vaccinated than boys and are taken to the hospital only when they are sicker. A result is that girls in India from 1 to 5 years of age are 50 percent more likely to die than boys their age. In addition, ultrasound machines have allowed a pregnant woman to find out the sex of her fetus — and then get an abortion if it is female.
The global statistics on the abuse of girls are numbing. It appears that more girls and women are now missing from the planet, precisely because they are female, than men were killed on the battlefield in all the wars of the 20th century. The number of victims of this routine “gendercide” far exceeds the number of people who were slaughtered in all the genocides of the 20th century.
For those women who live, mistreatment is sometimes shockingly brutal. If you’re reading this article, the phrase “gender discrimination” might conjure thoughts of unequal pay, underfinanced sports teams or unwanted touching from a boss. In the developing world, meanwhile, millions of women and girls are actually enslaved. While a precise number is hard to pin down, the International Labor Organization, a U.N. agency, estimates that at any one time there are 12.3 million people engaged in forced labor of all kinds, including sexual servitude. In Asia alone about one million children working in the sex trade are held in conditions indistinguishable from slavery, according to a U.N. report. Girls and women are locked in brothels and beaten if they resist, fed just enough to be kept alive and often sedated with drugs — to pacify them and often to cultivate addiction. India probably has more modern slaves than any other country.
Another huge burden for women in poor countries is maternal mortality, with one woman dying in childbirth around the world every minute. In the West African country Niger, a woman stands a one-in-seven chance of dying in childbirth at some point in her life. (These statistics are all somewhat dubious, because maternal mortality isn’t considered significant enough to require good data collection.) For all of India’s shiny new high-rises, a woman there still has a 1-in-70 lifetime chance of dying in childbirth. In contrast, the lifetime risk in the United States is 1 in 4,800; in Ireland, it is 1 in 47,600. The reason for the gap is not that we don’t know how to save lives of women in poor countries. It’s simply that poor, uneducated women in Africa and Asia have never been a priority either in their own countries or to donor nations.
ABBAS BE, A BEAUTIFUL teenage girl in the Indian city of Hyderabad, has chocolate skin, black hair and gleaming white teeth — and a lovely smile, which made her all the more marketable.
Money was tight in her family, so when she was about 14 she arranged to take a job as a maid in the capital, New Delhi. Instead, she was locked up in a brothel, beaten with a cricket bat, gang-raped and told that she would have to cater to customers. Three days after she arrived, Abbas and all 70 girls in the brothel were made to gather round and watch as the pimps made an example of one teenage girl who had fought customers. The troublesome girl was stripped naked, hogtied, humiliated and mocked, beaten savagely and then stabbed in the stomach until she bled to death in front of Abbas and the others.
Abbas was never paid for her work. Any sign of dissatisfaction led to a beating or worse; two more times, she watched girls murdered by the brothel managers for resisting. Eventually Abbas was freed by police and taken back to Hyderabad. She found a home in a shelter run by Prajwala, an organization that takes in girls rescued from brothels and teaches them new skills. Abbas is acquiring an education and has learned to be a bookbinder; she also counsels other girls about how to avoid being trafficked. As a skilled bookbinder, Abbas is able to earn a decent living, and she is now helping to put her younger sisters through school as well. With an education, they will be far less vulnerable to being trafficked. Abbas has moved from being a slave to being a producer, contributing to India’s economic development and helping raise her family.
Perhaps the lesson presented by both Abbas and Saima is the same: In many poor countries, the greatest unexploited resource isn’t oil fields or veins of gold; it is the women and girls who aren’t educated and never become a major presence in the formal economy. With education and with help starting businesses, impoverished women can earn money and support their countries as well as their families. They represent perhaps the best hope for fighting global poverty.
In East Asia, as we saw in our years of reporting there, women have already benefited from deep social changes. In countries like South Korea and Malaysia, China and Thailand, rural girls who previously contributed negligibly to the economy have gone to school and received educations, giving them the autonomy to move to the city to hold factory jobs. This hugely increased the formal labor force; when the women then delayed childbearing, there was a demographic dividend to the country as well. In the 1990s, by our estimations, some 80 percent of the employees on the assembly lines in coastal China were female, and the proportion across the manufacturing belt of East Asia was at least 70 percent.
The hours were long and the conditions wretched, just as in the sweatshops of the Industrial Revolution in the West. But peasant women were making money, sending it back home and sometimes becoming the breadwinners in their families. They gained new skills that elevated their status. Westerners encounter sweatshops and see exploitation, and indeed, many of these plants are just as bad as critics say. But it’s sometimes said in poor countries that the only thing worse than being exploited in a sweatshop is not being exploited in a sweatshop. Low-wage manufacturing jobs disproportionately benefited women in countries like China because these were jobs for which brute physical force was not necessary and women’s nimbleness gave them an advantage over men — which was not the case with agricultural labor or construction or other jobs typically available in poor countries. Strange as it may seem, sweatshops in Asia had the effect of empowering women. One hundred years ago, many women in China were still having their feet bound. Today, while discrimination and inequality and harassment persist, the culture has been transformed. In the major cities, we’ve found that Chinese men often do more domestic chores than American men typically do. And urban parents are often not only happy with an only daughter; they may even prefer one, under the belief that daughters are better than sons at looking after aging parents.
WHY DO MICROFINANCE organizations usually focus their assistance on women? And why does everyone benefit when women enter the work force and bring home regular pay checks? One reason involves the dirty little secret of global poverty: some of the most wretched suffering is caused not just by low incomes but also by unwise spending by the poor — especially by men. Surprisingly frequently, we’ve come across a mother mourning a child who has just died of malaria for want of a $5 mosquito bed net; the mother says that the family couldn’t afford a bed net and she means it, but then we find the father at a nearby bar. He goes three evenings a week to the bar, spending $5 each week.
SwissJumpRope is an athletic project to spread the word about VSLA program. It will develop women access to financial loans in African countries. This project runs in Switzerland on March 2018. You can easily take a step to improve lives of mothers and childrens in Africa by sharing this project with your friends or by direct donating.