The impact of savings mobilization on household income in the rural areas: case study VSLA in Panyangara sub-county in Kotido district

Abstract

The majority of the world’s poor live in rural areas with little access to financial institutions. Setting up village savings and loan associations has become an increasingly wide spread intervention aimed at improving local financial intermediation. Using a cluster randomized trial we investigate the impact of VSLA in Panyangara sub-county, we find evidence of positive and significant intention to treat effect on several outcomes, including the number of meals per day, household expenditure as measured by the USAID poverty assessment tool, and the number of rooms in the dwelling. The study employed survey research design particularly descriptive survey. The study was conducted in one VSLA group of panyangara sub county, Kotido district with a sample size of 32 members. Questionnaire was the main instrument of data collection in addition to interview guide and document review. The data was analyzed using descriptive statistics. The results of the study was presented in frequency tables and percentages. The data generated from open-ended items was analyzed by comparing and combining the responses from interview guide and questionnaire. Content analysis was also applied for the interview guide. The major finding of the study was the impact of savings mobilization is linked to an increase in savings and credit obtained through VSLAs which has increased agricultural investment and income from small business. Other findings include; the monthly propensity to consume out of the family income basically reduces after joining the self-help groups because members have to save compulsorily, the rate of school dropout is significantly lower in the families of group members than families who do not belong to self-help groups people who accumulate large sums of money react to interest rates than people who accumulate small sums of money. Deriving from evidence and conclusion of the study, the following recommendations followed; encourage the development of VSLA, embark on community sensitization to enhance savings mobilization, integration of agricultural activities and linkage of VSLA to formal financial institutions.