The Catholic Men Savings Group in Saints Peter and Paul Parish of the Tamale Archdiocese embraced the concept of Village savings and loans with Jaksally Development Organisation and partners-MTN Ghana, Access BANK Ghana. The pilot which was done with 33 men at the start of the cycle started saving through mobile technology and mobile phones.
The Men’s group which started on 22 November 2020, finished their savings on 14th November 2021. The normal VSL processes and procedures were done through mobile money using a merchant line from MTN and a mobile phone from Access bank. The group made 54.2% thus from a start-up share value of 10GHS they shared out with a new share value of 15.42GHS.
The least shareout amount was 771GHS from 50 shares purchased throughout the year and the highest was 4,010GHS from 260 shares purchased throughout the year.
A Village Savings and Loan Association (VSLA) is a group of people who meet regularly to save together and take small loans from those savings. The activities of the group run in cycles of one year, after which the accumulated savings and the loan profits are distributed back to the members. The purpose of a VSLA is to provide simple savings and loan facilities in a community that does not have easy access to formal financial services.
A VSLA is a transparent, democratic, and structured version of the informal Savings Groups found in many parts of the developing world. The main differences are that the VSL methodology emphasizes accountable governance, standardized procedures, and simple accounting that even the least literate, least influential member of the group can understand and trust. The Catholic Men Society (CMS) Savings group was piloted on the 22nd November 2021.
Organizational structure: Groups usually hold annual elections. The roles and responsibilities of the five-person management committee are clearly defined. This is to encourage the participation of all members in the operations of the group; moreover, to protect the group from being dominated by a single individual. The group had all-male leadership from the chairman, Recordkeeper, Box Keeper, Money counter 1 and 2
Each group is composed of 15 to 30 self-selected individuals. Groups meet weekly and members save through the purchase of shares. The price of a share is decided by the group. At each meeting, every member must buy between 1 and 5 shares. The share price is set by the group at the beginning of the annual cycle and is fixed for the entire period.
CMS started with 33 members with the cost of one price of one share of the CMS group was 10GHS. So each member bought by saving at least 10 GH or a maximum of 50 GHS per week
Savings: The system is very simple, but the result is powerful. Members do not have to save in equal amounts; these can vary at each meeting. Additionally, by saving more frequently in very small amounts, they can build their savings more easily, contributing to improving the security of the household. People who are often excluded from participation in ROSCAs (Rotating Savings and Credit Associations) because they MUST save the same amount at each meeting, can join VSLAs because the amount they save is not fixed.
CMS bought 6,320 Shares in total. Thus they made a total savings of 63,200GHS in one year.
Loans: Savings are deposited to a loan fund from which members can borrow in small amounts. These can be up to three times the value of their savings. Loans are for a maximum period of three months in the first year and may be repaid in flexible instalments at a monthly service charge determined by the group. This flexible repayment system is a decisive advantage when compared to the rigid repayment demands of MFIs. Poor people, especially those living in remote rural areas, do not usually have a regular income, so accommodating their need to repay in varying amounts at irregular intervals is crucial. CMS made total loans of 17. The loans amounted to 92,500GHS. This was possible from a service charge per month of 10%.
Social Fund: Each group may decide to have a social fund, which provides members with a basic form of insurance. It is not mandatory. The social fund serves as a community safety net for several purposes – such as emergency assistance, festivals, and funeral expenses. Members agree upon a contribution that must be made by all members at every meeting. The social fund is not intended to grow, but to be set at a level that covers basic insurance needs. It is not distributed back to the members at the end of the annual cycle but remains a group asset. The piloted CMS group had an SF of 2GHS per week. Therefore, the group made 3,120GHS in their SF wallet
Record-keeping: Each member has a simple passbook in which their savings and loans are recorded. While the VSLA does not keep a group ledger, it maintains a simple centralised notebook in which the closing cash balances of the Loan Fund and Social Fund are entered at the end of each meeting. The members are expected to remember this at the next meeting. CMS and Jaksally piloted a mobile phone and mobile technology system hereby saving through the mobile money platform. MTN provided the merchant line to Jaksally and CMS, whiles ACESS Bank Ghana provided the mobile phone. All records were downloaded from the MTN platform and shared on the savings platform of the group weekly.
Security: The materials, passbooks, loan fund, and social fund of the VSLA are kept in a lockbox, which is safeguarded by the group Box-keeper between meetings. The lockbox has three padlocks, and the keys are held by three members of the group who cannot be members of the Management Committee. The system is robust and ensures that there can be no manipulation of the group’s passbooks or funds outside of group meetings. CMS members were trained on mobile fraud, security, whats app platform handling, and forwarding od messages that cloud lead the group to fraudster taking advantage.
‘The Cycle’: Groups normally operate in one-year cycles. At the end of every cycle, the accumulated savings plus service charge earnings are shared out among the membership in proportion to the amount each member has saved. The annual share-out resolves any outstanding issues and builds confidence in the system. It is an ‘action audit’ that provides an immediate verification to all members that their money is safe, and the process is profitable.
CMS made 6,320 shares which are equal; to 63, 200GHS. They made loans of 92,500GHS which brought them a total service charge of 34,268GHS. They share out on a new share value of 15.42GHS 54% increase from the old share value of 10GHS.
10 members (33%) save through share buying of 260 shares each the maximum they could buy or purchase for the year. 13 (43%) members purchased 200 each and above shares. In total 23 members making 76% of the membership bought or purchased over 200 shares. The CMS group made in total 97,418GHS which was shared out. The least earned amount of 771GHS and the highest 4,010GHS were made in the cycle.
After the share-out, members who do not wish to continue may leave the group and new members may be invited to join. Members who plan to continue to the next cycle can re-invest any amount they wish of their shared out money in the loan fund for the next cycle. This initiates lending activities with a useful amount of money on hand.
When a new cycle begins, members conduct new elections, review their constitution, and may make changes to the conditions that apply to savings, lending, and the social fund. They may, for example, agree to change the social fund contribution, share price, or the monthly loan service charge. However, the share value and loan service charge can never be changed during the cycle. After this process, the group then continues to operate independently in its second (and future) cycles.
What has happened to CMS group?
Jaksally and partners have helped 30 people access and manage their basic financial services that are: independent, self-managed, transparent, self-financing, accessible, secure, and profitable
Impact of vsla on CMS
Overall, the promotion of the group has led to an improvement in financial inclusion, household business outcomes, and men’s empowerment. There was also evidence of improved resilience: in members affected by one need or the other, men’s experienced improved, financial security and income. It impacts also, on average consumption or other welfare outcomes. It led to increased savings and credit access, improved microenterprise outcomes, increased men’s empowerment, and improvements in households’ financial well-being.
Take-up: Take-up rates averaged 60 percent across the group with a steady increase over time as a new group has been formed. Weekly median savings contributions are above US$8 (50GHS). In the group, 6o percent of members have completed at least one savings cycle, receiving their savings and interest share-outs. Fifty-six percent (56%) of members have received at least one loan from the group, paying with a median interest rate of 10 percent (10%) with a term ranging between one and three months.
Financial Inclusion: VSLAs lead to significant improvements in financial inclusion among female/male participants. Total savings can grow by US$14 (PPP, 2011), a 34% increase relative to none VSLA group. The program also affects access to credit: 56& percent of the group men obtained loans; The average amount borrowed in one year was 5,441GHS (US$893.34 (PPP, 2011).
Coping with difficulties: Food security, health needs, shelter, etc for households in VSLA communities are negatively affected by difficulties, and drought during the project period. VSLA has general impacts on food security, health needs, shelter, family relations including the program helping households to effectively offset the negative shock due to the COVID 19 and difficulties in the country currently termed financial drought. Results on income follow the same pattern.
Business Outcomes: Microenterprise activities have positively been affected by the program, which has led to an almost 100-percent increase in the number of businesses operated by men in the group and a 60-percent increase in the duration of mostly short-term seasonal business activities.
Men’s empowerment: Men’s empowerment is increased markedly, as men got to influence household decisions. The project pilot has led to a more than 8-percentage point improvement in the share of men who be having a high degree of control over the household business, decisions, and food expenses, as well as a 6 and 4 percentage point increase in men who will say they influence education and children’s health-related expenses, respectively.
CMS digitization pilot process has been a success for Jaksally and its partners.