Nearly 1 billion women worldwide do not have a bank account. Despite gains in overall account ownership, women continue to lag behind on almost all financial inclusion markers, with no progress on the gender access gap between 2011 and 2017. For over 27 years, CARE has worked with poor, rural communities to form and train VSLAs, so that women living in poverty can save, invest and improve their lives. As part of the POWER project, CARE linked mature VSLA groups in Rwanda and Côte d’Ivoire to formal Financial Service Providers (FSPs) – a response to the needs and demands of VSLA members, who want to ensure the security of their savings and to grow their businesses by accessing more capital than can be generated through their VSLA pooled savings. More detailed information on the linkage landscape and guidance on the process can be found in the POWER Africa learning documents – including the first global mapping of savings group linkage and a handbook for FSPs – but below we’ve pulled out 5 key findings on when linkage is effective and the impact it can have:
1. Linkage can amplify VSLA effects
Linked groups in the project achieved higher returns than unlinked groups and these returns increased at a faster pace. By the endline of the project, in Rwanda, a typical linked group will earn approximately $25.15 USD more per member than a typical unlinked group. In Côte d’Ivoire, a typical linked group will earn $12.65 USD more per member than a comparable unlinked group. Linkage provides access to services that are formal versions of fundamental VSLA functions. So unsurprisingly, many of the aspects that make a VSLA successful also make linkage successful: trust, financial literacy and social cohesion.
2. Gender dynamics matter
Certain gender dynamics can get in the way of this beneficial amplification. Beliefs about women’s capacity for financial management, the optics of a woman having an individual bank account before her husband, access to key inputs and other issues can significantly hinder a woman’s chance of benefiting from linkage. POWER Africa used gender sensitive approaches such as joint decision-making modules embedded in financial training, women’s support groups, community gender committees and male champions to mitigate these challenges and multiply the impact of women’s financial inclusion.
3. Linkage must be grounded in context
Whilst connecting VSLAs to FSPs did have an impact on savings and returns in both countries, other variables such as account dormancy rates, group attendance, the effect of gender on returns, predictors of bank account balances, growth rate of savings and other trends varied substantially. While national borders and different policy environments are one way to divide the data, other distinctions also offer clues as to how context affects linkage. For example, an urban/rural divide often coincides with other factors that are important to using and benefiting from linkage, such as financial literacy, market access, gender norms and ambitions for income generation. This is why it is important to view VSLAs not merely as a model for saving but as a platform for training (beyond financial literacy) and advocating for the needs of members.
4. Village Agents can be powerful advocates
To promote the self-replication and sustainability of VSLAs, CARE has created the Village Agent model, where experienced VSLA members are trained to become Village Agents (VAs) who then establish and train new VSLAs. The model has also been used to promote other CARE community empowerment initiatives including financial literacy, enterprise development skills and gender equity training. POWER Africa has produced CARE’s first report consolidating over 10 years of experience implementing the Village Agent model, which highlights the key role Village Agent Networks (VANs) can play in advocating for the needs of members and influencing formal financial service provision.
5. Something in it for everyone
Linkage needs to be beneficial for individuals, VSLAs and FSPs for it to be a desirable goal and a sustainable strategy for financial inclusion. Our analysis showed that linkage offers benefits for women beyond increased income: ability to pay for expenses like medical costs led to greater autonomy and decision-making power, as well as health-seeking behaviours resulting in a reduction of birth complications. For linked groups in both countries, Return on Savings (RoS) and Return on Assets (RoA) were significantly higher and grew faster. VSLA members were more confident in the security of their savings, were motivated by the prospect of increased interest, and access to larger loans motivated members to save (for eligibility) as well as to invest in income generating activities. For Financial Service Providers, linkage needs to be profitable. Analysis suggests that to achieve profitability, VSLA-linked products need to reduce operational costs and/or increase reach. Mobile services offer a way to reduce expenses, paving the way for a profitable model of linkage.
Coming up next…
Our POWER Africa project reinforces what we at CARE have known for a long time – that VSLAs are a driver for (in)formal financial inclusion – but it also demonstrates that VSLAs are much more than that. On Wednesday, to mark World Savings Day, we will celebrate the savings group model by looking at VSLAs in relation to three themes: gender sensitive programming; improving financial inclusion for adolescent girls; and building members’ resilience to economic shocks.
About POWER Africa
Project: POWER (Promoting Opportunities for Women’s Economic Empowerment in Rural Africa)
Reach: The project increased financial inclusion for 750,000 individuals and their families (far beyond the original goal of 480,000)
Impact group: Poor, food-insecure households in rural areas, with a focus on women and adolescent girls
Where: Burundi, Côte d'Ivoire, Ethiopia and Rwanda Duration: 2014-2018 (4 years)
Partners: Mastercard Foundation
For more information see POWER Africa’s learning documents.