VSLs, Sacco link promotes saving culture
The Village Savings and Loans groups (VSLs) and Sacco linkage initiated by Malawi Union of Savings and Credit Cooperatives (Muscco) is yielding unprecedented results as more VSLAs have found SACCOs as safe places to save their savings for other investments, an official has said.
Against the background that most VSLs lack sustainability because they do not save the money at the end of the cycle, Muscco embarked on the project to link VSLs to Sacco aiming to promote a savings culture and increase access to loans to individuals so that they venture in bigger businesses.
Mussco corporate affairs, public relations and communications executive Maness Chinoko said in an interview that in the consortium arrangement where Muscco’s role is promoting development of apt financial services structures through the VSL model, savings accumulated from the linkage currently stands at K516.13 million.
She said: “The amount [K516.13 million] is over and above the amount that has been in circulation in VSLs. This has been realised from 1 368 VSLs that have been linked to various Saccos across the country.”
According to Chinoko, in the linkage, VSLs are using Saccos as their investment destination, while members access loans at their VSLs since funds saved at the Sacco grow as they earn interest for the benefit of the members, upon withdrawal of their deposits VSLs extend loans to their members.
“The savings-led approach inculcates the culture of self-dependency other than dependence on external loan fund. Credit-led approach in the long run is not only unsustainable but also exports rural communities savings through interest payment to the lender, thereby negatively affecting rural community economies,” she said.
At 2.9 percent, Malawi national savings rate is below the recommended 12 percent, a situation economists have said negatively affects economic development.
An official in the ministry of finance economic planning and development responsible for VSLs and microfinance speaking with Business News recently underscored the importance of empowering VSLs as a tool for increasing and promoting a savings culture.
He said: “VSLs are an important aspect in the financial inclusion. Other than helping poor communities to start and expand businesses but also increase investments in food security, nutrition and livestock and other assets, the groupings also promote savings.”
VSLs mirror Saccos in design and operations, since in both cases, members save through buying of shares. Members also have an opportunity to save in deposits.
The difference is that in a VSL, members at the end of the year share all financial assets equitably save for the social fund, while in a Sacco, members share out only the dividend realized while leaving the capital intact. n
