Zimbabwe Village Savings and Loan Associations

By this point, I was ready to be involved. I was asked by Oxfam America to direct its Community Finance Department in 2004. To begin, I booked a flight to Zimbabwe.⁸ At Oxfam America’s southern Africa regional office in Harare, local staff were already intrigued by the savings group idea because of the Village Savings and Loan Association (VSLA) program, the international NGO CARE’s major savings group project in the country.

The director of Kapufuma Ishungo, Alfred Hamadziripi, and I spent more than two weeks traveling from village to village learning everything we could about VSLAs in prac­tice. In 2004, Zimbabwe was notorious for President Rob­ert Mugabe’s political repression and its consequences—the country’s collapsing economy, hyperinflation, and food cri­sis —as well as for having one of the highest HIV/AIDS rates in the world. In spite of these crises, Zimbabweans remain some of the friendliest and most community-minded people I have met. Zimbabwe is a beautiful, fertile country with a temperate climate. I didn’t miss the heat of Nepal and India.

I found the VSLA methodology very similar to that of the WEP groups in Nepal. Members saved small amounts each week, made loans from their savings, and shared the pool of savings plus interest at regular intervals. Volunteers commonly took it upon themselves to train new groups: it seemed the groups were so obviously successful that demand outpaced CARE’s trainers, who found it efficient to focus on training volunteer trainers in addition to their own work forming groups.

It became clear to me that the impatience of women to join VSLA groups was not in spite of the spiraling financial crisis in Zimbabwe at the time, but because of it. By keeping the funds and decision-making power directly in the hands of the members, particularly over loan length and interest rates, VSLAs were incredibly adaptive to the rapidly deteriorating currency that was erasing savings accounts in mainstream banks and rendering cash kept at home worthless.

When I traveled to Zimbabwe in 2004, inflation was more than 500 percent per year and rising daily. Several years later, inflation rates grew to thousands and then tens of thousands of percent per annum. The government was routinely print­ing new currency denominations with more zeros tacked on to keep up with its deflating value. Inflation made investments in Zimbabwean dollars worth nothing in foreign exchange, and financial institutions were collapsing. I expected savings groups to be struggling, too. Instead, I found them thriving.

Despite hyperinflation, the VSLA groups were virtually the only functioning financial institutions in the country.¹¹ When inflation was only 500 percent in 2004, the groups had charged a high enough monthly interest rate to maintain something close to equilibrium, so when a loan was repaid, the value of the loan would come close to its value when it had been issued just a month earlier. Even traditional ROS- CAs, where for each meeting everyone would bring the same amount of money to be pooled and given as a lump sum to a different member each month, disbanded. The value of the payout for the last person in line would be worthless com­pared with the payout to the first member.

VSLA group members coped with inflation by maintaining their basic principles but adapting their group’s specific sav­ings amounts and meeting frequency. Groups changed the interest rates on their loans at each meeting. Some short­ened loan lengths, as it was no longer sustainable to hold a loan more than a month. As hyperinflation peaked a few years after my study, I learned that savings group members would take out a loan, purchase something in the morning, trade it for a higher price in the afternoon, and pay back the loan by the end of the week. Other groups near the borders trans­acted in foreign currency. Some groups abandoned currency altogether and calculated loans and loan payments in terms of fast-moving consumer commodities such as bars of soap, cans of oil, and sacks of rice and maize. Groups accepted the Botswana pula and the South Africa rand even before the gov­ernment began transacting in foreign currency. As transpor­tation costs soared, groups used their collective purchasing power to send one person to buy in bulk, financing profitable cross-border trading.

I was struck by the inventiveness that group members employed to protect their assets, especially under conditions by which regulated institutions were unable to adapt quickly enough. With timely access to flexible loans that changed as often as the circumstances, VSLA members maintained their small businesses. The group members could better manage to buy food and other essentials without resorting to selling such productive assets as seeds, plows, animals, and even land, a process that had many of Zimbabwe’s poorest spiraling into deeper poverty the next farming cycle because they had sold what they needed to farm with.

I also saw that savings groups such as VSLAs helped ease another crisis in Zimbabwe. At one meeting, I watched a woman stand up and proclaim she was HIV-positive to a mixed group of people with and without HIV. Her fellow group members cheered. The woman displayed extraordinary courage, I thought, because at the time (and to this day) there was a harsh stigma toward people who were HIV-positive, in Zimbabwe and in much of the world.

The CARE organizers reached out to people with HIV/ AIDS, initiating savings groups such as VSLAs to enable people to support themselves. The groups helped people with AIDS start trading businesses because these businesses required much less physical effort than farming, and that allowed people to still be productive even as they became sick. I watched a VSLA meeting in one village where each member contributed to a common fund so that when one of the members died of AIDS, they could have a decent funeral.

Back in Harare, Alfred Hamadziripi told me his proj­ect’s story.¹² It sounded familiar. The Kapufuma Ishungo program in Zimbabwe began in 1999 and quickly trained 272 groups, with the promise that the groups would soon be linked to a matching fund. To Alfred’s dismay, as soon as the first groups received their loans, they stopped saving and meeting and eventually defaulted. CARE scrapped its match­ing fund program and three-quarters of the groups immedi­ately disbanded; the groups that were left were reeling and disappointed, hoping that a grant was eventually headed their way. The CARE staff revamped their program, this time with the requirement that each group would mobilize its own sav­ings fund for loans and there would be no external capital. Starting with the handful of groups still functioning, Kapu- fuma Ishungo spread across the country, urged on by the wild success of savings groups to navigate hyperinflation. It turned out to be as true in Nepal and India as in Zimbabwe: the fun­damental principle was to keep it simple, and no handouts.

Based on the success of CARE’s VSLA project in Zimba­bwe and the presence of the CARE team to provide training, we decided to start Oxfam’s first savings group program in Zimbabwe. We enlisted the Zimbabwe Adult Learner’s Asso­ciation (ZALA) to start a VSLA-type program, pairing the savings groups with their literacy work as Marcia Odell did in Nepal. We gave a grant to ZALA for their work on the pilot project, but we found ourselves caught by Zimbabwe’s rapid financial descent. ZALA had converted the grant money immediately into Zimbabwean dollars, so it lost its value so quickly that once staff were trained, no funds were left for implementation. Oxfam’s—and my—first savings group pro­gram was a disaster.

Fortunately, Oxfam let me try again.