VSLA Enyesh: Increased Income and Improved Livelihoods (Ethiopia)
Similar to other parts of the Amhara region in Ethiopia, farmers in Libo Kemkem district struggle to make ends meet partly due to a lack of habit around savings. The seasonal nature of income, added to local perceptions of saving money has hindered farmers' economic wellbeing and resistance to economic or agricultural shocks.
In September 2011, Abebayitu, rice farmer, was selected as one of the community facilitators to form a Village Savings and Loan Association (VSLA). She was recruited and trained by the project to facilitate the formation of the VSLA and monitor its performance. Abebayitu understood that her community was lacking both financial literacy and savings skills, and she became determined to organize her neighbors into the VSLA. In October 2011 she established a VSLA group called "Enyesh." Enyesh is a VSLA group located in a village called "Dikule." The Amharic name of the group means 'anticipating something positive.' Enyesh has 15 female and 5 male farmers, out of which 4 (2 female and 2 male) are lead farmers. Members regularly meet on a weekly basis and make individual contributions to regular savings and a social fund ($0.25 and $0.03 USD, respectively). Since its establishment, the group has accumulated 11, 4428.50 birr ($5,917 USD) in a form of regular savings, social fund contributions and interest from loans.
Members of the group testify that the VSLA is impacting their lives in various ways. Firstly, they have developed a greater sense of security because they can use their savings whenever financial insecurity arises. Secondly, the social fund contribution provides them with a form of social insurance coverage. Thirdly, members have a convenient source of credit at an affordable interest rate. VSLA participation has become a means of creating social bonds and cooperation among members while allowing them to build saving habits. Enyesh members now understand that just small savings can accumulate and bring change. One female member stated:
"The accumulated savings has become a readily accessible source of credit to members. Each member has reaped from the benefit of credit; i.e., on average two loans per head. Credit decision is made with full participation of all members; guided by a pre-established interest rate, credit period and conditions that members stated in their bylaw upon establishment of the group. The group is performing outstandingly with a 100% repayment rate."
With MEDA staff providing orientation on income generating activities, members have become active in creating other sources of income, leading to increases in household income. Enyesh members take loans for various productive purposes such as seed procurement, purchasing fertilizer, school fees, purchasing animals and household expenditures.
Tsehay, a female member, took out a 300 birr ($15 USD) loan from the group fund for animal fattening. She bought a goat kid with the loan and she sold the goat for 600 birr. She made a profit, only having to pay 45 birr ($2.30 USD) in interest. Similarly, five other group members have taken credit individually to help them purchase cattle for fattening, rearing, milking, or ploughing their land.
The VSLA has also enabled member farmers to have money in case of unforeseen payments. For example, this year, the government has announced to farmers that fertilizers are no longer provided on credit. Members of Enyesh are not worried with the new rule as they have another option—accumulated funds to acquire the necessary input for rice production. In addition to savings and credit, Enyesh members have strengthened their social ties by cooperating on household and farming tasks. For example, female members distribute cotton among themselves to spin into thread which they bring to the next savings meeting. The women take turns collecting thread that has been spun so that each can obtain enough to make one "Gabi" (thick cotton fabric) in a short period of time. Similarly, male members support each other in making traditional tools used in farming.
Before VSLA, members of Enyesh were solely dependent on land cultivation for their livelihood. Now they are able to expand their income source and are more resilient to shocks associated with farming. In addition to this, their income has increased through return on small investments they make by taking loans from the group fund. So far, the group has continuously saved for almost 2 years. Enyesh members have planned to open a savings account at ACSI, the local microfinance institution, as the group fund further accumulates and reaches an amount greater than what is needed for credit to members. This linkage will increase their credit access for larger investments with greater return.