CBR SVK – Sepone, Vilabouly, Nong Lessons learned from: Village Saving Funds for PWD (VSFs)

1. CBR SVK – Sepone, Vilabouly, NongLessons learned from: Village Saving Funds for PWD (VSFs) Project Timeframe: Sept 2006 - Dec 2010 Village Saving Funds implemented from May 2008 to Dec 2008 Main partner: 3 districts’ Office Labor and Social Welfare Role of HI: methodology, training, technical advisory Role of partner: liaise with local authorities; facilitate the establishment of VSF, assist in periodic monitoring - 1 project officer trained in microfinance for 6-8 VSF; methodology: « ILO handbook on village banking » + 1-2 months for adaptation to local context, preparation of training materials, operational materials, and monitoring forms; direct cost for setting up 1 VSF: 1000$ excluding seed money.

2. Background • PWD need access to small loans for IGA; there were no microfinance sources in target villages. • Why VSF instead of direct loans? • Advantages: mobilize/organize community resources (money and people); credit & savings; build capacity of community; through membership to VSF, PWD can also improve social participation; they may also have the opportunity to play a role in the VSF’s management committee and gain status in community. • Limitations: initial capital of VSF is often small at the beginning: high competition to get loans; only few loans of limited size. • Sustainability of VSF: in good situations (good loan repayment, interest rate enough to cover operational costs and loan default, transparent management, good saving rate in village) VSF can last long and grow; they are self-managed by the community, so they do not have to rely to permanent external support. Potentially they may borrow money from a district bank to overcome their capital constraints. They could become a permament source of microfinance and empowerment for PWD.

3. Results • Results: • 4 VSF are functioning well: growing membership and savings; good loan repayment; good support from village authorities; they only need to strengthen their accounting skills. • BUT: impact on PWD is questionable: • Only a few PWD participating in the VSF had real access to credit; competition to get loans is big and wealthiest members tend to get preference, because their families have a higher loan repayment capability. • There is the risk that, when a VSF exists, the PWD members of the VSF lose any interest in participating to Self Help Groups (SHGs); when interviewed, some PWD living in a village where both a SHG and VSF existed, tended to confuse the two, showing a greater awareness of VSF than the SHG. • Very poor PWDs (+-40%) do not participate to the VSF (no savings, little potential to engage in IGA); this is not too much of a problem from an “economic” point of view (they are too vulnerable to apply for loans in any case), but it risks to deepen their social exclusion. • Measure of effectiveness: • Monthly monitoring of following parameters: • VSF: standard village banking parameters: membership; savings; outstanding loans; loans repayment, etc. • PWD: % PWD members of VSF; % PWD members participating to VSF meetings; % PWD members who save; % PWD who applied to a loan and % of PWD who got it; repayment rate of PWD loanees. • Periodic structures interviews to: PWD member and non member of VSF; VSF members without disabilities; interview focus on potential and actual advantages that PWD get from VSF.

4. Necessary Conditions • Contextual requirements for creation of VSF: enough savings to constitute a minimum initial capital; demand of credit vs need for grants; opportunities for IGA; support from village authorities; enough people with sufficient education to constitute the management committee. • Financial and human resource requisites: • 1 project officer trained in microfinance for 6-8 VSF • direct cost for setting up 1 VSF: 1000$ excluding seed money • Technical expertise: medium understanding of saving led microfinance and village banking operations.

5. Obstacles: VSF loan terms exclude poor PWD. • Most PWD/households are capable to engage in traditional on-the-farm income generating activities (ex raise live stock) generate sufficient income to repay a loan; • VSF have full autonomy in deciding the loan terms • All VSF decided to provide loans for 3 months, extendable to 6; this time is often much shorter than the time requested by most on-the-farm IGA to generate income; • Many PWD are excluded by product design (loans terms) issue: loans are accessible only by those capable to repay them out of their ordinary income.

6. Conclusion • VSF have been functioning well but: • Have mostly benefited people without disabilities; no PWD is part of the management committee, so PWD have not directly benefited from training and capacity building delivered by the project; • Have not met the needs of poor PWD; • Risk to weaken the SHGs if participation of PWD to VSF is low. • Project has decided not to create new VSF, but to define an alternative strategy: • Establish a Saving and Credit Fund within existing self help groups (SHG SCF); the fund would belongs to the SHG and all SHG members participate to it; funds to provide loans will come from SHG members savings and by project support (interest free loan to the SHG); • If the SHG SCF develop well and reach a good level of autonomy, the project will propose to open the SCF to people without disabilities and to transform the fund into a Village Saving and Credit Fund (VSF).

7. Conclusion • A PWD SHG SCF is expected to have the following advantages over the VSF: • Project training and follow up will be focused on building the capacity of PWD; • SCF savings and credit rules can be defined so as to take into account the socio-economic status, needs and constraints of PWD; • Project financial support to the SCF will benefit PWD only • Ensure participation of all SHG members to the fund; those who can not take loans will have the opportunity to learn from other PWD’s IGA • The fund itself will respond to SHG members immediate needs and therefore encourage participation to the SHG itself; increased solidarity among PWD will translate into peer to peer support among PWD undertaking IGA • However, the following factors may limit the implementation of SHG SCF: • Only a few PWD may have the potential to be trained to manage the fund and the bookkeeping; • Regular support and follow up from project staff is necessary, at least for the first 6 months of implementation; a max of 6 SHG SCF can be supported by one field staff.