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Thuong Binh VSLA group meeting: the group was established in late 2021 with 25 local women farmers in Thuong Binh village, a remote and mountainous residential community in Ha Giang, Vietnam. Photo credit: Trang NK/CARE
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Sorting coffee beans at the Ara-Tay Coffee Cooperative processing facility in Son La, Vietnam. Photo credit: Laura Noel/CARE
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A survey of VSLA members in Vietnam discovered that more than half of the loans were spent on household production and business expansion. The multiple-purpose loans provide swift relief in times of urgent need.
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CARE USA’s senior director for VSLAs, Vidhya Sriram, visiting a savings group in Malawi. Photo credit: CARE
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CARE’s CISP project works with female coffee farmers in Goroka, Papua New Guinea. Photo credit: Douglas Diave/CARE
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Members of the CARE EMWE VSLA gather for a group picture in Dien Bien province, Vietnam. Photo credit: Loes Heerink/CAR
There are about a billion unbanked women around the world with no access to finance. A lack of financial knowledge and access prevents women in coffee-producing countries from actively participating in the coffee value chain and inhibits them from contributing to important decisions on the farm and in the household. However, that gender gap is slowly being bridged by small groups of women banding together and exercising the power of savings and loans.
The beginning of the 1990s marked a turning point in global aid. The United Nations and World Bank released studies showing that when financial aid was put into the hands of women, those assets were more likely to be held onto and spent cautiously on items such as food, healthcare, and housing. While serving as the Chief Economist for the World Bank, Larry Summers wrote, “Investment in girls’ education may well be the highest-return investment available in the developing world.”
Private aid groups, charities, and foundations started proclaiming slogans such as “Women are the key to ending hunger in Africa” and focusing on programs that addressed gender inequality. In 1991, the venerable humanitarian organization CARE initiated a project developed by Moira Eknes to help women in Niger form Village Savings and Loans Associations (VSLA). More than 30 years later, those humble VSLAs have reached more than 20 million people worldwide and are now strengthening industries such as coffee that depend on the success of smallholder farmers.
Trust and Solidarity: The Fundamentals of a VSLA
VSLAs are small groups of 10-25 people (predominantly women) organized in rural areas or even urban centers where people have little to no access to traditional financial institutions. They offer basic financial support and services, workshops, and classes on various beneficial topics, such as digital finance, gender equality, sustainable farming methods, nutrition, family care, and current market values.
Women in particular benefit tremendously from VSLAs that provide gender equality training. Studies have shown that women and communities participating in VSLAs achieve much more than just financial stability, although that in itself is a massive achievement. Participants have reported higher confidence levels, improved negotiation and communication skills, more agency and self-efficacy, economic resilience, leadership abilities, improved health, and increased market access.
In an interview with STiR Vidhya Sriram, CARE USA’s senior director for VSLAs, explained the principles behind the methodology.
“Effectively, it is a group of people within a community coming together and saving together. They are the owners of this. They set the terms and the interest rates. They decide who the leader of this ‘community bank’ is, and they decide who they’re going to lend to. So, unlike a microfinance institution, the folks in that bank of yours are your friends, neighbors, sisters, and children. They are very invested in what happens to you and how you use the loans that come from that pot of funding.”
Newly formed VSLAs spend the first few months learning about financial literacy, accounting, bookkeeping, and how to utilize digital finance tools. During this time, bonding as a group is heavily emphasized, which is the key to its success. “Solidarity is as important as their understanding of financial literacy because that keeps the group going beyond our engagement,” says Sriram.
Before a group starts lending, it must decide on a share value together. Then, members can begin buying up to five shares a week. CARE VSLAs limit shares to five per person to prevent disparities and monopolies from forming.
“It accrues pretty quickly, and then, within a couple of months, people can do a pitch and say, ‘I want to start a red pepper farm’ or ‘I need to buy a wheelbarrow,’ and they’ll make a pitch to the group and the group will say ‘this is what we think we should fund at this repayment rate.’ And it keeps going like that,” said Sriram.
A VSLA member from Den Village in Son La province receiving a loan. Photo credit: Bai Quoc Ky/CARE
Groups typically loan to an average of three people at a time. Loan repayment is surprisingly successful. “We generally have a 99% repayment rate on loans. Is there a bank in the world that can say that? This is why solidarity is so important,” Sriram explains. “That trust is basically what engenders the stability of the group.”
Nguyen Thi Kieu Trang, the marketing and communications manager for CARE in Vietnam, shared with STiR the results from a recent case study conducted in Vietnam’s Son La and Dien Bien provinces.
“Qualitative respondents appreciate that the loan is quick, unlike other financial institutions with longer processes. Respondents said that when they face challenges such as crop production failure or animal disease, they urgently rely on the VSLA loan to access financial support, given the fact that VSLA loan supports multiple purposes. The easy cash access and multiple-purpose loans are important to clarify why VSLA serves as an informal social security fund.”
“The first year, we just want VSLA members to save, get solid and accrue some financial foundation,” Sriram said. “Years two and beyond, we start introducing climate smart agriculture practices and begin specifically and deliberately training those people who have entrepreneurial capacity.”
This savings group methodology has now been adopted and replicated by many major aid organizations, such as USAID, Save the Children, Mercy Corps, and World Vision. “Aid agencies put savings groups into their programs across sectors because they work!” says Sriram.
VSLAs Revitalize Coffee Farming
CARE has been organizing VSLAs in Vietnam since 1991 and has worked with communities in 60 provinces and cities nationwide. In 2016, a special project entitled Technology Enhanced Agricultural Livelihoods (TEAL) was created to improve the economic rights of 2,600 women and men from the Thai and Hmong ethnic minorities of the Son La and Dien Bien provinces.
Vietnam is the second largest coffee producer in the world. While the country’s south is dominated by large-scale robusta coffee estates, the northern regions consist of micro lots growing arabica high in the mountains. In the Son La and Dien Bien provinces, located in northwestern Vietnam, 22,600 hectares produce arabica. Eighty percent of the smallholder arabica farmers in those regions come from marginalized Thai and Hmong ethnic minority groups.
Frequent landslides, soil exhaustion, and climate change make growing coffee in these regions more challenging every year. “The reality faced by local smallholder producers operating here is high production costs, limited post-harvest processing, weak market linkages, low bargaining power, and, ultimately, low returns,” wrote Nguyen.
VSLAs were established in both provinces and eventually offered classes on regenerative and sustainable farming methods, income diversification, and how to access the coffee market. Coffee value chain experts and market leaders gave VSLA members technical training and took them on field trips to arabica processing facilities and farms in Lam Dong province.
VSLAs eventually became production groups and started forming cooperatives to improve coffee quality on a larger scale. They learned to negotiate with buyers as groups rather than individuals.
Viral Knowledge In Action
The TEAL project exceeded its initial target of increasing the economic opportunities for coffee farmers and the local communities. Multiple cooperatives were formed, including the first women-led coffee co-op in the region, Ara-Tay Coffee. In 2021, over 90% of the women surveyed reported an increase in household income compared to the previous year.
Ara-Tay Coffee, founded by members from a VSLA, is the first women-led coffee co-op in Son La province. Photo credit: Ara-Tay Coffee
Cam Thi Mon, the head of Ara-Tay coffee Cooperative, said she “realized that only changing the farming and processing methods could help change the future of arabica coffee in Son La.” Many of Mon’s neighbors quit coffee farming and started growing fruit. But rather than join a fruit cooperative, Mon went home and convinced her family and husband to stay with coffee, using the new organic methods and specialty coffee techniques she learned from the TEAL project to start growing higher-quality arabica.
“We set up these model farms with little plots to show how we do whatever will benefit them,” explains Sriram. “We’re teaching these practices within the VSLA and then the women are going to their family farms and saying ‘how about we try this? Look what we’ve done on our model farms.’ And they teach those practices to their husbands, uncles, and anyone else wanting to learn, and it just goes viral from there.”
Perhaps one of project TEAL’s most positive and unexpected outcomes was a renewed passion for farming and pride in the quality of the coffee produced.
The case study reported that coffee farmers expressed their love for farming more and found meaning in what they were doing. “In the past, when coffee prices plummeted, farmers were willing to cut down coffee trees and replace them with other crops. Now, coffee growers have more pride in specialty coffee produced in Son La and Dien Bien, so they are ready to invest in expanding coffee farms and committing to sustainable cultivation. For coffee growers, coffee has become part of the local culture.”
Savings Groups Propagate Income Diversification
A savings group formed in Tanzania brought young and old smallholder coffee farmers together to collaborate on income diversification. The Jitegemee Group from the Mbinga District in the Ruvuma Region of Tanzania engaged local students to help them establish coffee seedling nurseries and increase their productivity under the guidance of the European Union’s and Ministry of Agriculture’s AGRICONNECT program.
In an interview with Vi Agroforestry, members of the Jitegemee Group (which means ‘rely on yourself) explained that they “picked this name because all members aim for self-sufficiency through enterprise,” says group member Beno. After watching a neighboring youth group learn how to start their own coffee seedling nursery and discovering that seedlings are more resistant to pests and diseases than plants from cuttings, the Jitegemee Group was inspired to do the same.
They invested their money from the savings group and enlisted the youth group to mentor and guide them through the process. This has proven lucrative since compact coffee seedlings are in high demand in southern Tanzania. The group also invested in a beekeeping and honey project, bringing in additional income.
Savings and Internal Lending Communities (SILC) established by the Catholic Relief Services (CRS) in Chiquimula, Guatemala, organized community nurseries that helped the families save enough money to annually renovate approximately 25% of each family’s farm, about 0.2 hectares. After four years, the SILC families were able to completely renovate their farms.
Savings groups organized by the Catholic Relief Services in Guatemala helped families save enough money to renovate their coffee farms after four years. Photo credit: Oscar Leiva/Silverlight for Catholic Relief Services
Another study conducted by CRS in Kenya reported that “Participants took advantage of the lower-cost loans afforded by the SILC to invest in other small businesses, diversifying their coffee farms and, therefore, their income sources. The interest on savings for some groups in Kenya reached 40% per year, providing a valuable source of cash at the end of the year.”
The Longevity of Community
VSLAs and other savings groups are about much more than financial stability. They become the beating heart of a community that benefits entire families and future generations. Husbands, brothers, and sons in the VSLA community begin to reconsider their concept of gender roles. Those households typically experience a shift towards equal sharing of responsibilities and decision-making.
“After CARE completed our support in the areas, many groups are still operating,” commented Nguyen. “Formed as community-managed models, the members find it useful and successfully carry out the activities on their own. VSLAs function not only as the saving and loan model but as a place where they can share and support each other and develop their sense of belonging.”
CARE sets up each group using community-based trainers and field facilitators from the local areas, intending for the VSLA to become self-sufficient after five years.
“The people who interact with these groups know the people within them, so they know the issues inherent within households,” says Sriram. “They’ll know if someone has an issue with gender-based violence [GBV] or food security, and they will work with the group and tailor their response to say, ‘We should put in some interventions around food security and GBV. We need referral mechanisms.’ So having 20-25 people come together every week is an opportunity as well to train them on a host of other things and this is why groups continue. The average group is five to eight years old. They continue without us.”
Catalysts for Change
Savings groups and the women in them are catalysts for change. Building a woman’s agency, empowering her economically, and connecting her to the value chain and marketplace not only benefits her household and community but also has a lasting impact on the coffee industry itself. An industry that draws from 100% of its talent pool and utilizes 100% of its participants’ capabilities is far more likely to succeed than one that hobbles along at 50% capacity.