ASSESSING THE IMPACT OF VILLAGE SAVINGS AND LOAN ASSOCIATIONS (VSLA) ON RURAL HOUSEHOLDS’ WELFARE IN THE LAMBUSSIE DISTRICT

Abstract

VSLAs are allowing millions of unbanked people in developing countries to save and borrow without resorting to formal banking systems. Empirical studies suggest that rural households’ access to saving and credit enhances their income, food consumption, health status as well as improvement in education. Though many VSLAs exist in the Lambussie District, there is limited evidence on the determinants of membership in such groups as well as the specific impact of VSLAs on households’ income, food consumption, education and health. Therefore, this study's main objective was to examine the impact of VSLAs on the welfare of rural households in the Lambussie District. Primary data were collected from a sample of 227 VSLA beneficiaries and 139 non-beneficiaries using stratified random sampling. Propensity score matching, comparative analysis and logit model were used to analyse the data. The findings from the study revealed that the income level, age, status as a head of household, the number of children, marital status and educational level of respondents are the main determinants of membership in VSLA. This study identified short loan repayment period, insufficient loan amounts, default loan, lateness/absenteeism, high interest rates and collusion/disagreements as the challenges confronting VSLA members. The study also showed a large positive and statistically significant relationship between participation in VSLA and improvement in one’s household food consumption, income, health care and children’s education. As much as 38% and 17% of total and per capita weekly household expenditure, respectively, can be attributed to participation in VSLA interventions. This is consistent with most prior studies and seems to suggest that, if properly designed and implemented, VSLAs equally can contribute to rural poverty alleviation