Promoting the financial inclusion of local communities, especially youth and women, through local savings and credit management mechanisms has proven to be a viable mechanism of empowering smallholder farmers. That is why the Village Savings and Loans Associations (VSLAs), organized around the mobilization of capital, the management of savings and credit by the local communities themselves, are strongly promoted within the 2SCALE partnerships. In Burkina Faso, in our rice and maize partnerships (Nebnooma and Agroserv), VSLAs are progressively being set up and constitute in part a tool to satisfy the financial needs of the farmers.
April 08, 2022
Fostering financial inclusion through the promotion of Village Savings and Loans Associations (VSLA)
Towards simplified access to savings and loans
The goal of improving financial services in rural areas has led to the development and widespread use of village savings and loans associations (VSLAs), which provide savings services as well as insurance and credit for low-income populations in rural and peri-urban areas.
Savings and loans are essential for smallholder farmers to manage unforeseen situations and continually invest in their farms. However, the current conditions of access to savings and credit from financial institutions do not favor low-income rural communities, especially small agricultural producers. Given this fact, the VSLAs built around local dynamics contribute to promoting access to financing that meets their needs.
Within the Sababou GNOUMA VSLA in the rural commune of Bama (Region of Hauts-Bassins), whose economy remains strongly dependent on the production of rice, Mrs. SAWADOGO Koritimi, rice producer, confided us as follows :
After training on the advantages and the methodology of implementation of the VSLAs organized by the 2SCALE program, I was motivated to create a VSLAs group called (Sababou Gnouma) composed of 25 women. The basic idea was that we, as young women producers and sellers of rice in the locality of Bama, encountering difficulties of access to financing for our rice activities, have a mechanism of saving and credit to finance ourselves. Today, my peers and I are really satisfied. The success of our activities has created a strong demand for membership from other women rice producers. These requests led to the creation of another VSLAs group (Allah Baraka) also composed of twenty-five women.
In the locality of Andromane, even if the women producers had already heard about this financial product, the support of 2SCALE facilitated a better understanding. Mrs. KINDO Safoura, secretary general of the Naboinswendé group, which produces maize, explained:
We have known about VSLAs through the credit union networks. However, the 2SCALE program has helped us to become more aware of its operating principles and has generated more interest among members.
VSLAs are therefore a locally accessible avenue for access to savings and credits, as explained by ZOROME Neymatou and KINDO Azèta who both benefited from credits to set up income generating activities in addition to their maize production activities.
“Thanks to this group, I was able to obtain a loan to start my small business selling loincloths and women's clothing”, said Neymatou.
In total, there are more than 70 women involved in the rice partnership VSLAs and more than 100 women in the maize partnership of which 60% are under 35 years old.
Mutual trust and respect of the functioning rules
The success of the VSLAs is undeniably based on the trust between the members and the respect of its functioning principles. In order to avoid crumbling, the members of the VSLAs Sababou Gnouma and Allah Baraka in the localities of Bama and Nongtaba, Naboinswendé and Wenkonta in Andromane, have developed operating mechanisms to ensure sustainability. These mechanisms are related to the governance of the associations and the security of the funds that are mobilized. As for the issues related to the mobilization of capital, the amount of savings, credit, interests, the modality of distribution of savings, loans, reimbursements and sanctions to indelicate members are decided in a consensual way. Mrs. Mrs. SALGO Lizeta, rice producer and member of the VSLAs Allah Baraka testifies:
Members who do not have valid reasons justifying their absences to the meetings are obliged to pay up to one thousand francs. This is a dissuasive measure that favors the optimal functioning of the VSLAs.
A solution for mutual aid and social cohesion
Beyond its main objective of providing an integrated global mechanism of savings and credit to its members, the VSLAs within the rice and maize partnerships are strongly involved in developing a mutual aid facing the problems and the social events that their members meet. To this end, a solidarity fund has been set up in order to constitute a support fund. Within the VSLAs Nongtaba, Nabonswendé and Wenkonta, the amount collected to support this is 50 francs during the regular meetings.
From informal to more formal financial services
Today, all the VSLAs of the locality of Bama and Andromane are involved in a process of formalization of their associations. In the long-term, they intend to move from a purely informal activity to more formal financial services. The members of these associations consider this as an opportunity to access vital financial credits. The 2SCALE program, by facilitating the implementation of the VSLAs within the rice and corn partnerships, positions itself as a key player in the promotion of financial inclusion.