Creating Access to Financial services for the youth through Village Savings and Loans (VSLs)

1. Creating Access to Financial services
for the youth through VSLAs
Prepared and presented by:
Asum-Kwarteng Ahensah
Program Support Manager
Plan Ghana

2. Presentation outline
o Background to Financial access (Exclusion)
o Plan Ghana Response (Phase I)
o (VSL Methodology)
o Multi-level partnership to scale up
o Reach: Across Africa and Ghana
o (Phase II) : youth-driven
o Challenges
o Recommendations

3. Background• Access to financial services by the poor is constrained
by inadequate institutions that provide appropriate
services (chiefly savings, but also small, flexible loans);
• Some populations (rural settlers, women, youth, migrant
tribes etc) are more excluded --- due to distance, social
and other barriers.
• Lack of access to viable financial services deprives
communities of the opportunities to build cash assets
through savings and to raise financial capital to initiate
and expand their businesses.
• Populations remain in poverty !!
07/18/13

4. Plan Ghana’s Response (Phase I)
• Design and implement programs that promote financial
inclusion via Village Savings & Loans (VSL)
methodology:
Projects:
 Barclays-funded Banking on Change (BOC)– 3-year
duration targeting Adults (2009 to 2102)
 CIDA-funded Promoting African Grassroots Economic
Security (PAGES) project. 5-year duration targeting youth
07/18/13

5. Basic features of the VSL model
 VSL methodology is designed for the very poor (financially excluded) .
Enables them to manage their household cash flow more efficiently
and flexibly and to invest in income generating activities that secure
and stabilize cash income:
 self-selected group of people living in the same community, who pool their
cash into a fund from which members can borrow
 Group membership could be: pure stand (e.g youth; women; men); or
mixed
 Group-dynamics regulated by agreed constitution
 Borrowed money is paid back with interest, causing the fund to grow !
 After about a year, the fund is shared among the members in proportion to
each one's savings (shares). This process produces pay-outs for
members.
 Members may receive a return on their savings investments 30%-100+%
per annum!!!.
 The groups normally re-form immediately and start a new cycle of savings
and lending.
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6. Value additionValue addition
• Ability to mobilize own savings on a regular basis which
serve as loan fund from which members borrow at ease
without any form of collateral/guarantor
• Provide a social fund against emergencies.
• inculcates habit of regular savings, provides relatively
easy access to financial services by the excluded;
• Relatively low cost
• ensures social cohesion or unity even in communities
difficult to mobilize (e.g: we have 3 Fulani groups!!)
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7. Multi-level partnership to scale-up
• .
07/18/13
UK:UK:
•BarclaysBarclays- (Corporate/Private)
•Plan InternationalPlan International (INGO)
•CARECARE (INGO)
AfricaAfrica::
•Barclays : Ghana, Egypt, Uganda, Kenya, Tanzania, Kenya
•Plan Ghana, Egypt; Uganda, Kenya, Tanzania, Kenya
•CARE Ghana, Egypt; Uganda, Kenya, Tanzania, Kenya
Ghana:Ghana:
•Barclays
•Plan Ghana,
•CARE Ghana
•9 LNGO implementing partners
•Community Volunteers (CVs)
•Village Savings & Loans Groups (Adults + youth)

8. Reach Across AfricaReach Across Africa
• Within 3 years, established over 21,000 village savings &
loans associations (VSLAs) with over 500,000
membership in Ghana, Uganda, Tanzania and Kenya.
• Accrued over $6.5m in savings
• Loaned out over $5m.
• Nearly 500 groups formally linked to group accounts in
branches of Barclays
07/18/13

9. Reach in Ghana
Indicator BOC
(predominantly
adult-based )
PAGES
(youth-based
project)
Total %
Youth
Total # VSL groups formed 2,927 349 3,276 11
# groups graduated 1,596 26 1,622 1.6
Total membership 77,372 7,808 85,180 9.2
# members graduated 41,922 667 42,589 1.6
% women 77% 73% 75
Cum. savings mobilized GHC 4,093,296
(US$ 2m)
GHC449,184
(US$225,000)
$2.25m 10
Total Loans disbursed GHC 3,458,652
(US$ 1.7m)
GHC349,118
(US$175,000)
$1,875,000 9.3
Av. Cost/member GHC 20 (US$10) GHC 18.60 (US$9) na na
Attendance Rate 93% 88.3%
Retention Rate 99.3% 98.8%
07/18/13

10. Selected project outcomesSelected project outcomes
 Improved access to loans by VSLA members in terms of
# of beneficiaries, size of loan and # of times that loans
are available (VSLAs account for almost all loans
contracted by their members in the past 2 years).
 % of VSLA members who contracted loan increased
from 39.8% to 73.2% during 3-year project duration.
 VSLAs are the major savings mechanism for members
 % of VSLA members hiring labour increased from a
baseline of 39.8% to endline of 50.8%
 Average amount invested in IGAs increased from US$60
to US$110 ( positive economic impact although not
enough to reduce susceptibility to poverty).
07/18/13

11. Selected ImpactsSelected Impacts
• Nearly 70% of VSLA members who indicated
improvement in quality and quantity of their meals
attributed the change to VSLA.
• Close to 80% of members reported improved access to
children’s education attributed the change to VSLA.
07/18/13

12. Phase II (Youth-led): objectivesPhase II (Youth-led): objectives
 Over 200,000 INDIRECT beneficiaries will be reached
through households
 Support youth (under 35 yrs) to set up 1,650 youth savings &
Loans groups with at least 41,000 members
 Integrate skills-building to achieve additional impact:
 financial literacy, employability and entrepreneurship skills
training to beneficiaries.
 Expand geographically through training and use of community
volunteers (CVs);
 Support the establishment of around 41,000 sustainable IGAs
and small businesses
07/18/13

13. Key Challenges
• Youth migration tends to negatively impact on their
mobilization, attention, and retention
• High youth unemployment a huge barrier to savings
• Potential “drain” on accumulated funds by commercial
MFIs if careful linkage of VSL groups is not achieved
07/18/13

14. RecommendationsRecommendations
 Employ “smarter partnerships”--- multi-level but with
emphasis on strong community-based mechanisms
 Move beyond access to savings & loans towards
business/entreprenuerial capacity enhancement for
greater impact and sustainability
 Business start-up support must be “economically
meaningful and viable”
07/18/13