VSLA A FINANCIAL MODEL FOR SHORT TERM WORKING CAPITAL IN AGRI-BUSINESS

By: Fred Owera

VSLA AFINANCIAL MODEL FOR SHORT TERM WORKING CAPITAL IN AGRI-BUSINESS

FACTS FOR VSLA METHODOLOGY• The basic principle of the VSLA

methodology is that members are self-selected,

• Group members save money, which is the source of loan capital from which they can borrow.

• The group uses internally generated funds, thus there is no external funding.

Facts cont`d• VSLA is made up of 15 -30 members,

membership is open both to women and to men.

• If associations is big with more than 30 members, they are encouraged to divide into smaller sub-associations

• VSLA is autonomous and self-managing, this is fundamental to their mode of operation and objectives.

• VSL Association’s goal is institutional and financial independence.

Facts Cont`d• VSLA is comprised of a General

Assembly and a Management Committee.

• The General Assembly is the supreme body from which the Management Committee is elected

• Each member has only one vote.

Facts Cont`d• VSLAs have 5 elected Committees

members, a Chairperson, Secretary, Treasurer and two Money Counters.

• They are subject to annual re-election at the start of a new cycle and may be removed at extraordinary meetings.

• At least two of the Committee members should be female in the case of mixed Associations.

Facts Cont`d• VSLAs in Uganda meet on a weekly

basis, but can determine longer durations after their first saving out (action audit)

• All transactions are carried out at meetings in front of the Association

• This ensures transparency and accountability.

Facts Cont`d• Members are able to witness who

has saved and who has not, who has borrowed and who has not.

• The Association uses a lockable cash box to prevent unauthorized cash movements

• limits the risks of tampering with records

• This improves on financial controls

Facts Cont`d• The cycle of savings and lending is

usually between 8 to 12 months.

• At the end of this period the accumulated savings, interest earnings and other earnings, are shared

• Each member`s share is proportionate to the amount saved throughout the cycle

Facts Cont`d• VSLAs agree on a set of rules, or a

Constitution, to guide their activities.

• VSLAs give out loans for productive purposes to members only. The size of a loan available to a member is linked to the total value of his/her savings ( 3 times of the member total savings) .

• Interest is charged on loans falls due every four weeks/month.

GROUP

Repay loans interest

Cumulated working K

Booster/start up loans

Short-term working

capital/credit

3

4Purchase Inputs

(seeds)

Action auditShare money between

members

5

For Agribusiness

2 VSLA METHODOLOGY FRAMEWORK

12

VSLA and agri-business funding

• Low transaction cost compared to high way financial service providers

• Easy access to finance. It is immediately available in the neighborhood at any meeting date every week.

• Low interest rate; it is also shared among members at the end of the cycle.

• Internally generated funds by members of the group.

• There is no need for collateral.

• Provides a platform to engage other service providers(Buyers,).

VSLA PERFORMANCE AS OF JULY 31, 2013• Membership- 655,502(70% Female)

• Cumulated savings- 43.7Billion

• Average Savings per members UGX 62,747

• Average Portfolio utilization 72%

• 235 group savings accounts with Barclays bank

• 75 group savings account with CERUDEB

• 972,294,400 deposits with Barclays Bank

End of presentation

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