VSLAs and Enterprise Development: Practical Lessons from CARE Ethiopia and Bangladesh

VSLAs and Enterprise

Development

Practical Lessons from CARE Ethiopia and

Bangladesh

Access Africa

Pursuing financial inclusion for 30,000,000 poor HHs across Africa by 2018

Market Engagement Strategy

Promoting poverty reduction of 10 million HHs by 2015 through market-based, value chain approach

VSLA and Market Engagement @ CARE

Financial Inclusion Integrated Approach Market Engagement

Emphasis on: savings-led financial

inclusion

Observation: organic joint

marketing

Emphasis on: deliberate sequencing of VSLA and enterprise

development

Observations: complex but high

potential, more than one way to do it

Emphasis on: enterprise

development and value chains

Observation: organic joint

savings

Continuum of Experience

Financial Inclusion

VSLA Initiatives in West Africa

Integrated Approach

Productive Safety Net Project Plus in Ethiopia

Market Engagement

Strengthening the Dairy Value Chain

Continuum of Experience

Strategies: 1. Improving milk production and collection

system2. Improving access to input and output

markets3. Improving the milk transportation network4. Ensuring access to quality services5. Improving the policy environment

Strengthening the Dairy Value Chain (SDVC) Project: Doubling the dairy-related incomes of 35,000 rural smallholding and landless households in Bangladesh.

Bangladesh Dairy Value Chain

Current Aug, 2011

Target

Participating Households 36,020 35,000 Farmer Leaders 3,294 3,500 Milk Collectors 283 350 Livestock Health Workers (LHW) 201 165 Information Service Centers (ISC) 49 50 Community Agri-Shops (CAS) 100 - Artificial Insemination (AI) 9,136 12,000 HHs' Avg. production (lit/day) 1.70 2.40 HHs' milk consumption (lit/day) 0.39 - HHs' Avg. milk sales income (Tk/day) 35 45

Market Engagement Progress

SDVC Performance

• Initially organic, then project promoted

• 1,182 producer groups representing 36,020 producers (83% women)

• 63% groups formalizing savings activities (n=863)

• Nearly 50% of savings groups invest exclusively in dairy sector

Savings Emergence in SDVC

• Total savings: $58,734

• Re-investment in dairy sector: $23,834

• Other investment: $8,646

• Collective cushion: $34,900

40% - Dairy-re-lated activities

15% - Non-dairy-related investments

45% - Cash on hand

Key Savings Stats

VSLA-lite model developed to provide groups with key guidelines and avoid promoter overload

Producer group promoters trained in savings promotion

Promoters introduced savings through existing producer groups

Savings adoption and savings rates integrated into participatory performance tracker used by groups

Ongoing monitoring analyzed savings application

Savings Promotion Model

Successes, Challenges, Lessons

Successes and Lessons Challenges and Lessons

High-rates of reinvestment in dairy helping to overcome critical constraints to upgrading

Increased groups coherence and capacity to participate in dairy sector

Reduced cannibalization of key value chain assets to respond to short-term cash flow needs and/or shocks

Emergence of new hybrid group / individual enterprises with women co-investing in improved breeds

Organic emergence of savings led to non-uniform promotion and adoption Management and governance quality varies across groups and key principles such as rotating governance not always pursued

Producer groups sometimes larger than optimal savings group size, driving challenges

Blend of most poor and less poor members demands more sophisticated share system to be successful

The bottom line: Savings groups support VC promotion but require deliberate strategy

Financial Inclusion

VSLA Initiatives in West Africa

Market Engagement

Strengthening the Dairy Value Chain

Continuum of Experience

Integrated Approach

Productive Safety Net Project Plus in Ethiopia

Market Focus

Strategies:1. Push CFI HHs upward via VSLA promotion, producer

marketing group formation, microleasing arrangements, financial literacy, business skills and advanced business skills training

2. Pull CFI HHs upward via private sector engagement in multi-stakeholder platforms, forward and backward linkages and new financial product development

3. Purposeful VC selection, intervention sequencing and combination in order to enhance resilience and asset building

Productive Safety Net Project Plus (P+): Improving resiliency and asset base of 47,000 chronically food insecure households as a means to facilitate their graduation to food security

Integrated Approach

P+ Goal and Objectives

GOAL

PSNP HOUSEHOLDS

Livelihood assets increased &resiliency enhanced

Graduation from food aid

Objectives

Access to Microfinance(Financial assets increased)

Access to Markets(Engaged in functioning markets)

Access to Water, Sanitation(Health &productivity improved)

Learning andSharing(Enabling environment enhanced

Asse

t Sta

biliz

ation

|

Ass

et A

ccum

ulati

on

PSNP Transfers (Consumption Support)

Pull

Stra

tegi

es

Food Insecure

Food Secure

Chronically Food Insecure

PSNP Beneficiaries

*Increase Financial literacy *Establish / strengthen producer groups

* Increase use of technology and inputs

* Promote VSLAs

*Create linkages to extension services

* Support on- and off-farm enterprise selection

*Increase linkages to formal financial services

*Transition out of participant relationships

* Support multi stakeholder platforms

* Enhance market information systems

* Increase linkages between SMEs and output markets

* Support financial services providers to reach down market

Push Strategies

*Transition out of participant relationships

*Increase capacity of extension services.

* Support input suppliers and tech service providers to reach down market

1

2

3

Modified P+ Causal Model

* Provide basic business skills training via SPM

* Provide advanced business skills training

Impact• Nearly 1,000 HHs have graduated from

PSNP• In P+ areas, 60 and 80% of all HHs achieving

graduation have been supported by P+

Outcomes• Financial Inclusion

– 2,000 P+ VSLAs with 37,224 members – Total savings of over $285,188– MFI linkages for 8,232 VSLA HHs, 30,301 people

• Market Inclusion– 13,454 farmers organized into 648 PMGs around

target value chains– 85% HHs reporting they have the knowledge

they need to manage their enterprises

P+ Results to Date

Ato Gediso ShiloSoyama, Dale, Sidama

• Household composition:– Married, 3 children– PSNP since 2005, P+ since 2009

• Microfinance Linkages: – Both Ato and wife are VSLA

members– HH savings of ~3/ month– Linked to Sidama MFI,

successfully repaid $170 loan

• Market Linkages: – Investing in maize, red bean and

shoat fattening VCs – Petty trading as IGA

• Key Outcomes: – No longer homeless– Sending first daughter to school– Improved food availability – Increased assets– Investing in additional income

streams

The Model in Practice

Microleasing arrangement explained to PMG members.

Advanced Business Skills training provided on a demand-driven basis.

SPM and Financial Literacy trainings provided based on group performance

VSLA promoters organize interested HHs into groups of 15-25 members and trainings commence.

VSLA promoters market VSLA opportunity to P+ target HHs. Word of mouth promotes non-P+ HH adoption.

Formal VSLA trainings and ToTs for all implementing partners

Integrated Promotion Model

PMG members engage in VC activity and meet leasing terms

Microlease translation completed.

PMG members trained on technical aspects of VC.

VC promoters organize interested HHs into producer marketing groups (PMGs) of 15-35 members.

VC promoters market opportunities and producer marketing groups to P+ HHs exclusively.

Market and VC analysis conducted at regional and national level

Microfinance Linkages Market Linkages

SPM and Financial Literacy trainings provided based on group performance

VSLA / MFI linkages facilitated based on demand and group

maturity

PMG members pursue VC activity,repay microlease post-harvest Demand-driven

advanced business skills training offered

Key Findings on Delivery

12,000 providers

VC Supporters

VC Actors

Target Group Members

25,000 HHs

Direct Impact GroupVery poor, primarily

women

50,000 HHs

The Importance of the Impact Egg

Targeting, Sequencing and Combination

Starting with VSLA improves outcomes for most vulnerable

Self-selection for VSLA is vital to success

Market aggressively to more vulnerable HHs

May be minimum tipping point to support FHHs

Promote VSLA / group enterprise separation but respect member choice

THANK YOU

Christian PennottiTechnical Advisor,

Economic Development Unit

Email: [email protected] Phone: 404.979.9195

Skype: cpennotti

http://edu.care.org