Assessing the village savings and loans programme as a sustainable and cost-effective rural finance in Zimbabwe: Case of Midlands province

Abstract

Years of economic decline has seen many financial institutions struggling and in some cases collapsing and closing. Financial institutions are finding it difficult to continue operations with fewer sources of deposits available. This has resulted in financial disintermediation. The rural populace in Zimbabwe has been the hardest hit by the situation as they fail to access finance from the banks and remain largely unbanked. This has seen a financial model, the Village Savings and Loans model being aggressively implemented by non-governmental organizations as a way of cushioning the rural families.This model is meant to be self-sustaining, with the individual group members pooling their own resources and lending the funds among themselves to start income generating activities. However, little is known or documented as to whether the groups formed by the implementing organisations are sustainable and serve their purpose in rural Zimbabwe. The study set out to investigate whether the model is sustainable, cost effective and improves accessibility of finance to rural families in Midlands, Zimbabwe. The study followed a qualitative approach with focus group discussions and interviews with Village Savings and Loans specialists from the two participating organisations, CARE International and World Vision Internationals. The results of the qualitative studies were complemented by quantitative techniques, with questionnaires used to collect data on changes in income levels and determining relationships between the age and growth of the group and any increase in income levels. The study proved the initial proposition that the Village Savings and Loans model is cost effective to both the individuals who join the groups and the implementing organisations. It also proved that the model is sustainable beyond donor presence as some groups were thriving in areas where the implementing organisation had already left the community. Auto replication of the groups also proved that the model is widely accepted in communities in Midlands province and thus proves that it is sustainable. This positive outcome can be used by several implementing organisations to secure more funding so that they cover more areas in Zimbabwe for the benefit of the rural populace.