An international humanitarian organisation, CARE introduced the concept of Village Savings and Loan Association (VSLA) in Niger in the late 1980s in response to challenges faced by rural communities, particularly women, in accessing formal financial services. VSLA is a self-managed group that does not receive any external funding. It provides its members with a safe place to save their money, access loans, and obtain emergency insurance.
There are about 9,330 savings groups in Bangladesh, with approximately 90,000 members in total. VSLAs are one of Bangladesh's most effective platforms for women's empowerment and financial control in meeting their urgent loan needs.
Between 2015 and 2020, the number of savings groups in southwest Bangladesh reached 2,700, with about 57,000 female members. Among these, 22,554 women received loans. Self-organised savings and loan groups offer a flexible loan disbursement process with various monthly payback choices.
A study conducted in 2023 by Strengthening Household Ability to Respond to Development Opportunities (SHOUHARDO) III Plus, which is funded by the United States Agency for International Development (USAID), indicated that the rural poor accept VSLA and other self-organised savings and loan groups because they find it more trustworthy and these groups can address their immediate needs.
Thus, the rural poor prefer these groups as an alternative to MFIs. As the other formal and informal channels of accessing loan is often expensive or complex, the self-organised savings and loan groups play crucial roles in meeting credit needs of the rural poor.
Mahima Hassan, undergraduate student, North South University