Digital Finance: Enhancing Women's Participation in Village Savings and Loan Associations
Women’s economic empowerment and VSLAs
Across the world, 43 percent of farmers are women. Despite making up a significant portion of the agricultural labor force, women disproportionately lack access to credit, resources and capital. Rural areas often lack banks or financial institutions, and women farmers, in particular, experience significant challenges in gaining access to finance.
Village Savings and Loan Associations (VSLAs) represent one promising solution. VSLAs are “self-managed group[s] of 15-25 individual members from within a community who meet regularly (weekly, biweekly, or monthly) to save their money in a safe space, access small loans and obtain emergency insurance” (CARE). Members accumulate savings by contributing to a group fund from which they can take out a loan and repay with interest.
VSLAs create an easy way for women to save money and gain access to loans that can improve their economic empowerment through increased financial independence, investing in income generating activities, or starting or expanding a business. VSLAs contribute to building women’s social capital and offer a space for them to connect, share and learn. They allow women to create a community network with other female entrepreneurs, giving them access to service providers they may have not known about if they were working in isolation. Many women also learn soft skills, such as conducting and organizing meetings, that are transferred to other community activities.
In this post, we will look at the findings from the Feed the Future Agricultural Development and Value Chain Enhancement (ADVANCE II) project on the impact of VSLAs on women’s empowerment. ADVANCE II, which is boosting productivity in the rice, soy and maize value chains in Ghana, is piloting initiatives with two of Ghana’s largest telecommunications service providers, Vodafone and MTN, to improve digital access to finance and information for VSLAs using mobile money services. ADVANCE II established more than 1,000 VSLAs in northern Ghana, where 68 percent of participants are women. The project completed a gender assessment to better understand how VSLAs affected opportunities for rural women and female youth in agricultural production, and assessed opportunities for VSLAs to promote market engagement and inclusion in beyond-production activities for rural women and female youth.
The findings of this assessment demonstrated that by gaining access to finance, women became more self-sufficient, relying less on their husbands. Women were able to pay for essentials like school fees, health care and more nutritious meals, reducing personal and family financial stress. This financial independence also allowed women to take part in joint household decision-making on how to save and spend income. Women often reinvested their savings into their farms by purchasing inputs that ultimately doubled crop yields. During the dry season, when women were unable to farm, they took out loans and invested in other income generating activities that contributed to their overall income.
Linking VSLAs to digital finance
Mobile money services
While VSLAs already provide a unique financial opportunity for women farmers, some organizations have taken this a step further and have incorporated digital technology into the group functions. Mobile money services create a digital space to save and transfer money, while reducing the risk of theft. In partnership with MTN, ADVANCE II registered four VSLAs in Ghana’s northern region with a group mobile money account. This allowed the group to set up an account and send money for free using a group SIM card, making transfers within VSLAs safer and easier.
In partnership with Vodafone, ADVANCE II is also piloting an initiative and registering four VSLAs in Ghana’s Upper East Region with a “Farmers’ Club” product. This is a digital service that not only allows members to save money securely and in areas without banks, but also provides access to farming advice, weather updates and market prices, as well as the ability to make free calls between group members. More information on these pilot initiatives is detailed in the findings section of the project’s gender assessment.
Digital VSLA platforms
Beyond access to mobile money services, Project Concern International, the International Center for Research on Women, and DreamStart Labs recently piloted a six-month initiative in Mara, Tanzania, to introduce digitally-managed VSLAs. A recent study of this program demonstrated that introducing digital services into VSLAs can have significant benefits, especially for women, who made up 71 percent of membership. They found that keeping records on a digital platform saves time on recordkeeping, making meetings shorter and giving women time back in their day to attend to other responsibilities.
Traditionally, VSLA groups use a written ledger to document transactions for each group member at each meeting. In this initiative, already established VSLA members moved the written ledgers to the digital app, and new VSLAs were created using the app from the beginning. Unlike the written ledger that simply keeps track of deposits made, this app prompted each member to set a savings goal from the start, advised members on how much they need to save each week to reach the goal and provided weekly visual updates on their progress toward reaching the established goal. Members who took out loans received weekly visual updates on the status of loan repayments. Lastly, for each deposit made, members received SMS messages confirming the amount they deposited, which created more trust in the system and helped reduce entry errors.
The women in both the new VSLAs and the groups that transitioned from written bookkeeping to the digital platform showed improved financial capability. Members in the groups using the digital platform were more likely to reach their savings goals, as they were aware of how much they have saved and how much more they needed to save to reach their goal at any point during the cycle. In addition, members using the digital platform were also more likely to pay loans back early, possibly as a result of the visual data on their progress presented at each meeting. Lastly, having the ledger managed digitally increased transparency among group members and improved accuracy of records.
The future of VSLAs and digital finance
Introducing digital finance to VSLAs has led to numerous benefits for women. Going digital could have unintended consequences, however, such as further limiting the capacity of women with limited or no access to technology to acquire financial services. For those women who have access to technology, including cell phones, using the mobile services requires additional costs and connectivity, potentially further marginalizing some women.
In addition, while more research is needed to understand how VSLAs and the use of these digital finance services are being affected by the current pandemic, using digital finance in VSLAs may be a promising practice as health risks and restrictions on mobility continue.
Where to learn more about AWE
The USAID Advancing Women’s Empowerment (AWE) program enhances women’s participation and benefit from agriculture. We provide technical assistance on gender inclusion in access to finance interventions for USAID and its implementing partners, as well as a range of other support services. To learn more, please contact AWE’s activity manager, Aslihan Kes (firstname.lastname@example.org), or AWE Team Lead Samantha Croasdaile (email@example.com).