The Pilot Village Savings and Loan Association (VSLA) program in Yemen is a microfinance initiative that aims to provide access to financial services to low-income households in rural areas of the country. The program is a joint effort between the Yemeni government and international organizations. Its ultimate goal is to empower communities and promote economic growth.
Approximately 1.1 billion women around the world are excluded from their respective countries’ formal financial systems. This reality becomes exacerbated during humanitarian crises. When a country experiences a crisis, its formal institutions stop operating optimally. This is exactly what has occurred in Yemen, as it continues to be the world’s largest humanitarian crisis. Almost 23.4 million people in Yemen are in need of assistance, and approximately 13 million of those people are children. The crisis has completely crippled Yemen’s political and financial institutions, and this vacuum is slowly filling with humanitarian agencies.
CARE International and VSLA
CARE (Cooperative for Assistance and Relief Everywhere) is a major international humanitarian organization that delivers emergency relief and administers developmental projects around the world. Its aim is to fight global poverty and hunger. In 2021, CARE formulated and enacted a pilot program that ran from November 2020 to October 2021 and established 12 VSLAs in Taiz, Yemen, a city that has been a central and critical location during the civil war in Yemen.
A VSLA works by establishing a group of 15 to 30 members who meet regularly to provide the group with a safe and secure place to save money and access loans from the money collected from the members of the group. VSLAs also set up insurance funds to allow members to access money in times of emergency and crisis. An external party, such as CARE, provides training to these members to agree on a purpose for the VSLA, devise and settle rules for savings and loans and run regular meetings, amongst other responsibilities.
Benefits of VSLAs
One of the key benefits of VSLAs is that they are highly decentralized and community-driven. They do not rely on external funding or financial assistance. This allows them to be more sustainable in the long run. And, because the groups are self-governing, they are able to adapt and acclimate to the distinctive needs and circumstances of their respective communities. The main purpose of a VSLA is to serve people with low income who live in remote and poverty-stricken areas and have little to no credit. Ultimately, over time, a VSLA should increase access and control over assets and resources for group members.
VSLA Distribution in Taiz
Although CARE initially planned to institute only 12 VSLAs in Taiz, it ended up with 16 formal VSLAs with 300 women by the end of 2021 because demand was high. Before the establishment of VSLAs in Taiz, 97% of people did not have any savings to fall back on in times of emergency, and almost 40% of households had to depend on negative coping strategies such as selling homes, skipping medication, or forcing kids to drop out of school. Afterward, the percentage of people in VSLAs with savings increased from 3% to 100%.
Furthermore, almost 50% of VSLA members were able to start small businesses, and the percentage of people using negative coping strategies dropped to 28%. Additionally, people in the community replicated these model VSLAs to create their own VSLAs, which resulted in total participation of 600 people in fully functioning VSLAs by the end of the program in Taiz. Additionally, over the course of the program, 88% of VSLA members distributed money from their respective VSLA social fund to assist people in need who were not part of VSLAs, creating a social security network in the city.
Challenges with the VSLA Program
Despite this success, the VSLA program in Yemen still faces a number of challenges. The biggest one right now is the ongoing civil conflict which makes it difficult and dangerous for external agencies to reach certain areas and guarantee the safety of program members. Additionally, because VSLAs are highly decentralized, it is difficult to replicate them in larger communities. As a result, the program could have a hard time reaching a larger number of people.
Thus far, the VSLA pilot program in Yemen is showing promising results in the communities it has impacted thus far. It has the potential to trigger economic growth and empower women in rural and impoverished communities. With continued support from the Yemeni government and CARE, VSLAs in Yemen could have the potential to create long-lasting economic transformation for low-income households in Yemen and beyond.
– Aemal Nafis