Evaluating the effectiveness of village banking in uplifting livelihoods of rural women: case of Blantyre rural

Abstract

For a long time, the poor in most developing countries like Malawi have been essentially shut out of credit and savings services because they do not meet the traditional criteria for borrowing since financial institutions regard them as high credit risk borrowers. It has therefore been argued that most of Malawi’s smallholder farmers are too poor to be able to benefit from any kind of access to credit, and that, even if they had access to adequate credit and inputs, their land constraints are so severe that any increase in productivity would still fall short of guaranteeing their food security (Government of Malawi, 1995). In relation to this problem, governmental and nongovernmental organizations in Malawi have introduced credit programs targeted at the poor people who have no access to credit facilities one of which is through the village savings and loans programs. However, the performance of village savings and loans programs and their impact on poverty reduction are not adequately documented and known in Malawi despite their becoming an important tool for poverty reduction. This paper therefore attempts to evaluate the effectiveness of these village-banking programs towards poverty reduction by assessing women in two strata. One stratum has women belonging to village groups while another stratum acts as a control. Each stratum has 10 randomly selected women. Locations where village groups do not exist within the similar characteristics of the locations where village groups existed qualified to be control locations. The study was conducted within the rural areas of Blantyre District. Twenty-seven village groups were chosen using a two-stage cluster sampling technique in each stratum. Ten female members were randomly selected from each village savings group as most village banking groups had an average of ten members hence this number was found to be informative and logical. The sampling frame of the yet to be published data collected by World Vision Malawi shows that Malawi has a total of 34,409 villages where 4,092 are in the Northern Region, 17,976 in the Central Region and 12,401 in the Southern Region. The records further showed that there are 607,261 members in village saving groups. The formula used to determine the sample size is detailed in the Methodology section. The sampling frame for control vi groups was all semi-urban locations and villages where village groups have not yet been established. The researcher used a combination of both qualitative and quantitative methods in data gathering. Data was collected from the primary sources by means of questionnaires distributed to 270 women beneficiaries in the targeted areas as well as 270 women in the control areas. Key Informant Interviews were also held with organization that implement and/or support village savings groups like World Vision Malawi and Care International. Secondary sources like activity reports, loan records and programme documents were also analysed. Data was analysed quantitatively through coding, counting, categorisation into tables and processing to provide frequency tables and percentages using the Statistical Package for Social Sciences (SPSS). Descriptive and univariate analyses were also done. The researcher has concluded that there is a noticeable and positive impact of village banking activities on the living standards, empowerment and poverty alleviation among the poor women in the targeted society. This was evidenced by the fact that over 83.3% of households whether indulging in business or experienced an improvement in their livelihoods, 83% of the respondents had their income improved while 76.7% of the respondents faced an improvement in diet and more people had access to credit among others. Since use of village banking alone as a tool for livelihood improvement cannot achieve much if the real causes of poverty are not directly addressed, it is recommended that government and other stakeholders should focus on developing efficient legal institutions and necessary infrastructure such as good roads, affordable health care and accessible market centres. It is also important that the government should make deliberate move on insurance policy to make sure that these women can also have soft and easy insurance policies to avoid losing their little savings through death of the member in the group since these village banks do not take security. Lastly, the village bank groups need to address all the pitfalls that are restraining other women from joining such groups if the village vii banks are to play a more effective role in uplifting the livelihoods of Blantyre rural women.