THE ROLE OF VILLAGE SAVING & LOAN ASSOCIATION (VSLA) IN IMPROVING MEMBERS’ LIVELIHOOD: THE CASE OF VSLA GROUPS IN BASONA WORANA WOREDA OF NORTH SHOA ZONE, ETHIOPIA

Abstract

This study was conducted on Village Saving and Loan Associations (VSLAs) located in Basona Worana Woreda, Amhara region, (Ethiopia) with the general objective of exploring the role of VSLA in improving the livelihood of its members and the specific objectives of assessing the role of VSLA in improving the social capital among the group members, assessing the role played by VSLA in contributing for empowerment of women, identify the challenges that VSLA group encountered and also study the future prospective of VSLA in the study area. Methodologically, the study employed both qualitative and quantitative research method. In the study area, there are 17 VSLAs with 394 members out of which 373 are females and 21 are male members. 4 rural based VSLAs from Keyit, Gudo Beret, Mush and Andit Tsed villages were purposefully selected, and the members of all the four VSLAs were participated in different data collection tools on random basis. The major data collection tools employed in the study were focus group discussion with 32 participants, key informant interview with 7 key informants and respondent survey with 60 respondents (30 control and 30 study group members). The study groups are those members who have been in the VSLAs group for two and more years while, the control groups are those members who have stayed in the VSLA groups one or less year. The major finding of the study indicated that, the VSLAs groups are formed by the support of Tesfa Birhan Child and family charitable association since 2014. Currently, there are 394 active members of VSLAs. Over 95% (374) of the members are women while the rest 5% (21) are male members. The result indicated that VSLA is quite important in improving the livelihood of the members in such a way that loan taken and financial shared out at the end of each year provided them with financial resources for starting new business and or expand the existing one, educating their children, buying agricultural inputs, household expenses, emergency needs, transformation towards new and modern living style, and above all contributed for improved saving culture among the VSLAs group members. The study found out also that, VSLAs contributed for the social capital of the members evidenced by the created very good level of trust among the group members, shared responsibility among, transparency in financial transactions, reasonable social supports, best interpersonal communication and relationships, good attachments among the members, and taking social responsibilities. VSLA is also found to be crucial tool in increasing the motivation of women group members to start up new business, save more, have good communication skills, good image and strong self-confidence of themselves, financial independency, decision making power, and able to sees better future. The result of the study indicated that, some problems related to VSLA include, absenteeism, shortage of fund for saving, not abided to the rules and regulations, absence of income diversities, their village settlement, the financial capacity of the VSLAs, and inadequate training. The futurity of VSLAs in the study area is also found to be promising that the stake holders in the area are working to provide comprehensive training on VSLA approach and identified knowledge gaps, helping to establish strong terms and conditions they have to abide by, and transform the VSLAs groups in to small scale enterprises. The overall recommendations are that, VSLAs group members should work on the gaps identified as well as maintain and build on their current strengths, work must be also done by the VSLAs group organizing Association (Tesfa Berhan) on creating formal linkages between VSLA and formal bank saving for better capital accumulation or better financial services. In general, the coordination among VSLAs, Tesfa Birhan, and Woreda and Kebele administration offices is highly recommended to maximize the benefit that possibly members gaining from their VSLA groups.