SAVINGS
Savings are considered to be the major source of investment income for the businesses where savings are not enough to run the businesses in order to meet the customer’s demand, the business owners usually get loans from the financial institutions such as commercial banks and other microfinance institutions. However, the coverage of the commercial banks is limited to urban areas and sometimes individual households in the villages do not have access to commercial bank loans.
The history of rural financial intermediation is not encouraging and the recent explosive growth in microfinance globally has concentrated in urban and semi urban areas ( Demirguc Kunt and Klapper 2012, Allen and Panetta 2010), When formal financial institutions are not available, households use informal mechanism instead, to save, borrow loan therefore one intervention which has gained increased popularity in rural Africa, Uganda inclusive and more especially in Lamwo district is the saving groups. Saving groups provide an alternative to the existing informal institutions and provide more flexible, transparency and security to the community. Economic rights are universal and part of the range of legal rights that were promulgated under the United Nations Declaration of Human Rights (UDHR) in 1948, with the goal of increasing access to financial means of living for all. To that effect worldwide, financial systems have been developed that aim at curbing poverty levels among the nationals. International literature is replete with conceptual and empirical works on a wide range of issues pertaining to women’s access to financial resources and their inclusion in businesses enterprises. However, a systematic search of the academic literature demonstrates a striking imbalance where little attention has been given to the women’s access to bank services and household decision-making. The failure to accurately identify the household decision-maker makes it likely that gender effects have not been accurately estimated (Bernasak et al, 2002).
One of the highly standardized type of saving groups is developed and promoted by Care International in 1991 called the village saving and loan association (VSLA) of which the study was carried on. Village Saving and Loan Association are similar to the microfinance institutions. It is a time bound accumulating saving and credit associations. It mainly consist of 15 to 30 members in a group who save regularly on weekly basis and members can borrow from the group funds to do other income generating activities and the loan borrowed are paid back with interest. VSLA normally takes a cycle of one year and the money is shared among the members in proportion to each members saving.
In VSLA members are self – selected to form a group and form an association and save money. The money saved is a source of loan capital from which members can borrow. The borrowing takes place when the amount of money saved by the members in the association is sufficient and interest is charged to repay the money hence which allows the growth of the fund.
VSLAs are autonomous and self – managed. There is no external funding for VSLAs and therefore, an association strictly relies on the resources or savings contributions made by the members. According to Hugh (2006), this is fundamental to the mode of operation and objectives of a VSLA since the association’s goal is institutional and financial independence. Any relationship that may be established say with an MFI or any other agency which can reduce the associations’ ability to control its own affairs needs to be approached in a very cautious manner.
VSLA uses a lockable cash box or heavy – duty lockable canvas pouch for keeping money. This prevents unauthorized movement of cash and the risk of tampering with the records of the association since record books are also kept in the cash box. For ensuring transparency and accountability, all VSLA transactions are carried out at meetings in front of the association, and all the members are in position to witness who has saved and who has not, who has borrowed and who has not and what this means in terms of net worth.
VSLA consists of a General Assembly and a management committee. The General assembly is the supreme body (comprising of all the associations’ members) from which the management committee is elected and from which it derives its authority. Each member has a single vote in case of an election. The management committee of a VSLA is comprised of five people namely a chairperson, secretary, treasurer, and two money counters. The members of the committee are subject to annual reelection at the start of a new cycle and may be removed at extraordinary meetings.
Micro finance, village savings and loan associations inclusive has been introduced to help the poor households save and access small scale loans for enterprise development, increase income and improve their welfare. Collins et al, 2009 states that for the poor households, savings is a much priority than borrowing, as saving builds assets and can help to address the risks as well as planned lifecycle events. They also emphasize those traditional places where the poor save the money are often of risk of theft or temptation. This means that the village savings and loan associations program is based on the belief that it’s for the extremely poor and those in rural areas.
The right approach is to begin by building their financial assets and skills through savings rather than debts. Statistics from the government of Uganda show that although poverty levels in the country have declined from 38% in 2003 to 31% in 2006, poverty in Northern Uganda remains high at 61 % (UBOS 2007). Data from SUSTAIN Uganda; “protect impact assessment in Uganda” demonstrates that, improvement in the livelihoods of the VSLAs members is due to their involvement in VSLA. After saving and borrowing through VSLAs, most members were able to increase their engagement in productive enterprises such as petty trade, beer brewing and livestock rearing as well as start up new business ventures and also send their children to school.
A report presented by UBOS on Uganda National Household Survey 2007/2010 pg 97 November 2010 release show that there was general increase in demand for loans from 10% in 2005/2006 to 17% in 2009/10. However application for the loans were slightly higher among urban residents 20% compared to rural counterparts 17% irrespective of the source of the loan. It also noted that, 12% of the loan applicants sought audit from informal sources compared to only 4% from the formal sources.
This implies that most of the households get loans from the informal sources such as the VSLAs where interest rates are low and loans are taken in small amounts. These loans are then majorly used for investment with the aim of increasing income while few households may borrow for consumption purposes in periods of hardship. This finds support from UBOS report November 2010 pg97 that 26%of the persons sought of loan for working capital in nonfarm enterprises, 16% for consumption, goods and payment of educational expenses 15%. All these will show how VSLAs contributes in improving household savings, investments and increase in their welfare. Obwona, (cited in World Bank, 2002) emphasized that the people’s living conditions in Uganda is deteriorating greatly. the poor no longer afford the social services that were formerly provided by the government and yet they cannot access financial services provided by the formal financial institutions to meet those needs, diversify household income sources especially from nonfarm activities and expand employment opportunities to ensure increased incomes which will translate into welfare improvements for the poor households.
Theoretical Background
In attempt to explain how sustainability of livelihoods projects are affected by the vulnerability context, the study will use the frame work designed by the UK Department for International Development (DFID) sustainable livelihoods framework
KEY
The framework stresses first that even poor people have assets (and development interventions should work from people’s strengths, their assets, rather than promote dependency by emphasizing their weaknesses and problems), and second that people have many different kinds of asset (or capital) and of livelihood strategy and income. The frame work indicates that Vulnerability to famine is therefore a function of people’s ability physically to access food and of their ability to exchange the assets at their disposal for food. Swift (1993) identified the following range of assets which may be important in determining people’s ability to obtain food.
Investments in; land, labour, and equipment for production, education in learning new techniques or skills and social and farming networks and market and product research. Use of stores; directly of food and financial or of value to buy food. Claims on; other households, for food, production resources or labour, patrons and village chiefs for help in need, the government and the international community.
As in the DFID framework the ability of people to access food therefore depends on their assets. Assets act as a buffer between production, exchange and consumption. Assets are built up in times of surplus and can be converted into food or production inputs in times of need. Peasants, and, more generally, poor people tend to have fewer assets than other groups and may be constrained in the utilization of those assets they do possess due to their partial integration in (imperfect) markets and society. Different assets have different roles in production, exchange and entitlements.
Saving
Nakawa Division in Kampala is one of the poorest among the divisions in Kampala with large slum network which is sign of high levels of poverty according UNDP, (2019) and World Bank, (2018) state that Slums are unhealthy, unsafe, and socially undesirable residential areas characterized by substandard housing and living conditions as well as overcrowding, Slums characterize poverty and inequality in low and middle income countries (LMICs), with a common thread in such a hodgepodge of poor housing structures being the lack of one or more of the following five amenities; durable housing capable of withstanding extreme climatic conditions; sufficient living area commensurate with the needs of family members and the community they are part of; access to improved and affordable water sources and quality; access to improved sanitation facilities; and secure tenure that protects against forced eviction all this poor slum characteristics exists in Nakawa and majority of the people in these slums are women, according to UBO, 2019) report the women in Nakawa Division experience more poverty than their male counter parts in addition Microfinance support Centre, 2018) records indicates that most of the women involved in the Saacco do not use the funds given to them for business purposes as a result they sale the few assets they have to pay Back Sacco funds , the report further indicates that the poverty in the slum areas among women further increase after receiving Sacco because of lack of business knowledge and as a result failure to pay back the loan and in most cases there is confiscation of the small property the family owns to clear their loan balance with the saacco. NPA, (2018) report further notes poverty is high among women in slummy urban areas like Nakawa division than men in Uganda as a whole and Kampala Nakawa division to be specific ,
