James Wilson, 39, lives in Kampanje Village,Traditional Authority Mphonde in Nkhotakota. The father of five, like many others in the area, relies on Lake Malawi to provide for his family. He sells small dry fish, which he buys from local fishers.
But Lake Malawi is not always open for fishing. Sometimes the weather is not good enough for the fishers to go out in their small canoes, which means that Wilson’s income is not certain. This pushed him to try rice farming. At times there’s a good market for rice in Nkhotakota, where people from other areas trek to for the commodity. However, he only has a small piece of land. As such, the money realised from rice farming is not much, considering the time and energy he invests in production.
“Generally, fish selling is more rewarding. With it, I earn enough money to buy food for my family, send my children to school and take care of other household needs,” says Wilson.
This was the story of Wilson and others in Kampanje community before a village savings and loan (VSL) scheme was introduced to the community.
“We just came together as fish sellers and discussed ways of saving our money. The VSL was a popular idea.
“I have no means of saving. It is too risky to save money in my own hut, and the bank is far away,” explains Wilson.
The VSL group members contribute to a fund from which they can borrow at an interest, helping the fund to grow. The regular savings contributions to the group are deposited with an end date in mind for distribution of all or part of the total funds to individual members.
Village banks channel funds within the village from people who want to save to people who have ideas for profitable projects, but lack the funds to realise them. The approach uses of the resources already present in the village, thereby making the bank sustainable.
Villagers are willing to save because of security and the interest on their savings paid by the village bank. The interest rate on loans is set by the group, and all income is paid out to the members.
VSL groups are set up through a series of training sessions where villagers learn how to decide, collect savings and dispense loans among themselves. The group is provided with a cash box with three padlock, kept by different people, which ensures that no single person can access the cash.
Since Wilson joined the project in January 2012, things have changed for the better for him. He can now save his money for a rainy day.
“I could not develop my fish business in the past as I would often consume all the capital, but now that I save with and borrow from my VSL group, I am running my business successfully,” he says.
He says the group is led by a management committee, which was elected by secret ballot in a transparent election.
“Records are kept in members’ passbooks using stamps that even illiterate people can easily count, and all outstanding balances on loans are memorised by the members sitting next to the borrower at meetings,” he explains how it works.
Saving and borrowing money is difficult in rural Malawi because microfinance institutions are mostly found in urban areas. Distances between clients in rural areas are often long, making loan disbursement and monitoring expensive. As an alternative to formal microfinance institutions, village banks are sustainable and low-cost options.
The Kampanje VSL members contribute a minimum of K1 000 per month. With the money Wilson has been saving from 2012, he has managed to pay fees for his two secondary school children and bought uniform for all his four school-going children.
“I consider myself among the rich in our community because there is nothing lacking at my home. I have constructed a burnt-brick house and just bought iron sheets which I will soon start mounting on the roof,” said Wilson boastfully.
Similar efforts are being implemented in other districts such as Dowa, Ntchisi Salima and Lilongwe under the Tiwalere Project by Feed the Children. Many people attest that their lives have changed since they joined village banks popularly known as Banki M’nkhonde.
“Since I joined the village bank in 2011, I have saved K165 000. But I want to make more because I want to construct a nice house for my family,” said Jessie Bese, a Salima woman from T/A Ndindi.
With the VSL programme in her area, Bese is likely to realise her dream house.