Abstract
The vast majority of the world's poor live in rural areas of developing countries with little access to financial services. Setting up Village Savings and Loan Associations (VSLAs) has become an increasingly widespread intervention aimed at improving local financial intermediation. Using a cluster randomized trial we investigate the impact of VSLAs in Northern Malawi over a two year period. We find evidence of positive and significant intention-to-treat effects on several outcomes, including the number of meals consumed per day, household expenditure as measured by the USAID Poverty Assessment Tool, and the number of rooms in the dwelling. This effect is linked to an increase in savings and credit obtained through the VSLAs, which has increased agricultural investments and income from small businesses.
Highlights
The vast majority of the world's poor live in rural areas of developing countries
Setting up Village Savings and Loan Associations (VSLAs) has become an increasingly widespread intervention aimed at improving local financial intermediation
Before assessing the impact of the intervention, we describe how successful it was in attracting participants to form VSLAs
Summary
The vast majority of the world's poor live in rural areas of developing countries. There they endure long periods of time between inputs into and outputs from agricultural production, uncertainty about harvest outcomes, and dependency on the weather. VSLAs have been introduced in 72 countries and have 11 million active participants worldwide.2 Despite this wide distribution and the increasing popularity among donors as a means of improving the financial infrastructure in remote rural areas, very little is known about the impact of VSLAs on household welfare. We provide a rigorous impact assessment of VSLAs on pre-defined household outcomes We do this through a cluster randomized control trial carried out in forty-six villages in northern Malawi. We assess the impact of introducing VSLAs at village level on seven general indicators of household welfare These were pre-defined as targets by the implementing partner as part of the project design. There are several suggestions for possible channels through which improved financial intermediation and participation in savings groups can have a positive impact on the participating households and local communities. The main channel through which the observed positive impacts on consumption seem to occur is through providing households with a means to save for investments, with the investments into businesses paying off
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
