Africa Solidarity Trust Fund changing lives through village banks
Fanny Jackson, 29, a member of Tiwale VSL Group talks about the link between household economic independence and climate shocks in Phalombe district, one of 15 districts declared a disaster area by President Peter Mutharika in early 2015.
VSL group members in Phalombe in praise of VSLs in Phalombe. Photo: ©FAO/ Malawi
At first sight, Village Savings and Loans (VSLs) may appear unattractive, but this financial concept is making a difference to scores of people affected by climate change in Phalombe district, southerner part of Malawi.
Also referred as village banks, it’s a simple idea whereby members gather and contribute their money individually which then becomes immediately available to them as loans.
Since loans are processed at the smaller-group level, and because members meet once in a week, loans are given on the spot at 20 percent interest.
The good thing about VSL is that it considerably reduces interest rates (banks are lending at 42percent interest rate) and considerably increases access to finance by small holder farmers in Malawi, especially women who contribute 70 percent labour force in agriculture - who need loans but lack collateral.
Tiwale Farmer Field School (FFS) is one of the most successful VSL groups in Traditional Authority Jenala in Phalombe, with a membership of 12 people out of which 10 are women.
Started in 2015 by a US$2 million resilience-building project funded by the Africa Solidarity Trust Fund (ASTF), the group has grown from seven members to 12 due to soaring profits and good governance practices.