10%

Promoting access to loans and savings in conflict communities through VSLAs

By UNDP NIGERIA

July 3^rd, 2022

When people face economic challenges because of conflict and food insecurity, it is often the poorest and most marginalized communities that suffer the most. This is because they are already far behind and have fewer ways to make money. Village Savings and Loan Associations (VSLAs) are very important in these kinds of communities because they help people get loans, save money, and make better money decisions at home.

This is particularly true for Rebecca Sabo, a widow caring for her six children in Obagaji, Benue State.

“VSLA trainers taught us how to manage the little money we make. They taught us how to do business, how to attract customers and buy goods. And with this money I can take care of my children. It has helped boost my self-confidence. I no longer beg and nobody makes fun of me.” As the chairperson of her VSLA group in Obagaji, Benue State, she explains that what makes this VSLA unique is the “training and practice that accompany the loans and savings which help them to survive and be better savers.”

Promoting access to loans and savings in conflict communities through VSLAs

The effects of the conflict in the Northeast, along with the Farmer-Herder crisis in the Middle Belt, have increased the frequency of violent encounters. There has been an increase both in the intensity and frequency of the conflicts in the last decade. The accelerated deterioration of the security situation in both regions adds to the burden on already strained basic services. The COVID-19 epidemic has also had serious repercussions for the lives and wellbeing of vulnerable families and internally displaced persons.

To assist communities affected by conflict in these regions, UNDP in partnership with Benue, Nasarawa and Taraba State Governments and in collaboration with Community Links and Human Empowerment Initiative (CLHEI), Young Men Christian Association (YMCA), and Taraba Advocacy and Rehabilitation Foundation (TARe) in January of 2022, began the implementation of a Village Savings and Loan Associations (VSLAs), training 145 VSLA groups with a total of 3031 members. Each group was given varied startup grants of between 50, 000 and 60, 000 naira. 75% percent of members are females enabling them to gain financial independence and start their own businesses.

Adebo Mordecai narrates that when the group he belongs to started, four leaders were appointed to ensure that the group adhered to the core VSLA principles. “We have the Chairperson, Secretary and Treasurer and Money counter. We facilitate proceedings and help to resolve any disputes that may arise.” Through this, Adebo and his wife, Iyefu who is also a member of the group, have been able to buy and sell farm produce such as yam, rice, and care for their children.

The success of the VSLAs lies in how simple and effective the program is. Each group is made up of a small team of people who meet every week and continually invest part of their income to create a hefty sum. The resources each group needs are a lockable cash box, ‘individual members ‘passbook’ and a notebook for keeping track of loans. The groups were trained in the VSLA process, record keeping, loan issuance, how to calculate interest rates and loan recovery. A VSLA kit was provided to each group to start the savings process in their respective communities.

Hauwawu Abu, a Money Counter in her group, revealed that they are a group of 19 people and members take out loans based on what each person contributes multiplied by 3. They contribute 500 naira every Friday. Any member who wishes to contribute more can do so as long as each contribution does not exceed 2500 naira. “We also contribute 100 naira aside for the social welfare of our members.” she added.

When Deborah Okolofo joined the VSLA group in Obagaji, she received a microloan of eleven thousand naira for a start. She used the money to buy over the counter drugs for her store. Debora, a graduate of School of Health Idah, in Kogi State was not able to get any job. This prompted her to open a pharmacy, where she sells drugs and can feed her family through the proceeds. Even though life has been tough for her, she was able to repay the loan in 2 months and hopes that things will get better going forward. Although she is genuinely concerned that the loan received from the VSLA scheme is not enough for her business aspiration, she hopes UNDP and other partners can help the group with more capital which she believes would yield bigger results.

For VSLA group members in Mbaya Community in Benue, they are ecstatic because this has brought a lot of community members together, it has empowered them and helped to address some of their underlying issues such as poverty and food insecurity. It has also allowed members to invest in alternative sources of income. They also contribute social welfare funds to help members in dire situations.

Wanger Afegha, secretary of the Mbaya VSLA group narrates that group members invest in the group by saving a minimal fee. This enables them to take out small loans from the collective pool, repaying the money in time with a flat rate of 10 percent interest. The members use the money to start businesses, buy and improve their farm plots, take care of their children’s education, and so much more. At the end of the year’s cycle, the group’s collective profits are then distributed to its members proportional to each member’s contribution.

In her case, Mlumun Msugh, also a member of a group in Mbaya, was able to lease land for her maize farm thanks to the loan she received from her group. For her “The VSLA has not only helped her to make money, but it has also empowered other women in her community to become active players in decision making in their households.”

“Before we were taught about VSLA, it was difficult to get food” Mguean Koom, a member of a VSLA group in Mbaya explains. “It has been difficult feeding my children from the proceeds from my business. Also, as women, we had trouble getting loans to invest in our own activities or businesses and we are delighted that VSLA has come to our rescue.” She added that from the loans and savings they have been able to expand their farms, renovate their houses and pay their children’s school fees.

The VSLAs have some many benefits and has helped the Mbaatsua group members who are predominantly farmers to overcome common barriers. Access to finance and loans is one such barrier, particularly because their village is in a remote area and commercial banks are not present.

Since I joined the group, I have experienced a better quality of life, my emotional well-being has improved due to the support I have received, and I am able to buy crops to farm. My quality of life would have been bad if it were not for this group” says Iorkaha Tyavkase, a farmer in Mbaatsua.

Most of the group members called on UNDP and partners to support the VSLA with more startup capital. For them, new business management skills earned from the VSLA training now assures new confidence level to risk bigger investment in the different communities.

This initiative is supported under UNDP’s Project on support for ‘Social Stability and Security of Conflict affected communities in Northeast and Middle Belt’ designed to enhance and foster social stability and peace through improved access to sustainable livelihoods and economic opportunities of communities affected by conflict. Thanks to funds from the Government of Japan.