Finance

In Mozambique, Communities Save and Prosper

By Melissa Bonotto, ChildFund Ireland

VSL Group

Members of Village Savings and Loans group gather for their weekly meeting.

It’s the end of another week and villagers from the Gondola district in Mozambique are gathered at their usual meeting spot. They each have their meticais – the local currency – and are eager to participate in today’s Village Savings and Loans (VSL) meeting. After the official welcome by the organization’s 23-year-old president Aida, they begin shouting out numbers, adding their money to the pool and cheering — happy to be investing in the future of their community.

Through a partnership with the local KureraWana Association, ChildFund Ireland and ChildFund Mozambique have encouraged VSL groups to invest in early childhood development as part of their new Communities Caring for Children Programme (CCCP). CCCP coordinator, Alberto, says “The community became so excited that they could not wait.” Some VSL groups began saving before the program’s official start date and will soon be able to support childhood development initiatives in the area. With an early start, most VSLs have saving down to a science.

Each group, consisting of about 15 to 25 members, meets weekly to make deposits into a communal fund. Participants must contribute at least one share each week, but they are allowed to give up to five. One share is equal to 20 meticais – or US$1.

Calculating interest in the group

A VSL group member calculates interests in the ground.

Members can borrow up to three times the amount they have contributed but only at the last meeting of the month. Borrowers have three months to pay down their loan, and do so at a 10 percent interest rate. Members follow clearly prescribed guidelines to participate and start each meeting by reciting the rules and penalties so that everyone in attendance understands.

With financial guidance, individuals use these loans to maintain or jumpstart new businesses and community programs. “These groups have been targeted for business management training during the program,” says Jean, a ChildFund Ireland grants officer. “So their loans are managed appropriately and used for viable businesses.”

Money counters

Two money counters add up the contributions.

Each group is supported by a secretary, two cashiers, a “money-box” guard and multiple key guards. All participants, identified by a number, announce how much they have saved for the week. The secretary records the amount in a ledger and members of the group cheer for their fellow banker’s accomplishments.

Beyond entrepreneurship, VSLs also encourage emergency preparation through savings. At every meeting, each participant contributes 5 meticais to a social fund that can be used as a donation to a member in times of need.

Clapping for savings

Members clap for the person who saved the most this week.

As their savings grow, VSL groups will help reshape the economic capacity of their communities and empower individuals to reach financial stability. Group members will start new businesses, providing services their neighborhoods need desperately, as well as support key community initiatives that will benefit the families and children of their community.

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