Beyond Financial Services - The DFID Chars Livelihood Programme in Northern Bangladesh: The Promotion of Village Savings and Loan Associations in a Multi-Input, Rural Livelihoods Programme
The purpose of this case study is to examine how Savings Groups can be promoted within a multi-input, rural livelihoods programme with pre-existing groups and targeted programme beneficiaries.
The Chars Livelihoods Programme (CLP) – a seven-year (2004-2010), GBP 50 million (approximately USD 74 million) programme of the UK Department for International Development (DFID) – aims to halve extreme poverty in the Jamuna river-basin of northwest Bangladesh by 2015. The temporary islands and embankment areas (chars) of the Jamuna River in northwest Bangladesh are home to three million people; poor and isolated, these rural communities face multiple livelihood challenges.
Through a network of 18 local NGO partners, the CLP tackles the poverty of the chars on many
The provision of asset and cash transfers to enable households to protect, accumulate and expand household wealth;
Infrastructural transfers to mitigate against flood and improve household sanitation and hygiene;
Social development assistance to raise social capital and improve social cohesion;
Enterprise development activities that improve and strengthen microenterprises and commercial suppliers on the chars;
Promotion and training of Village Savings and Loan Associations (VSLAs) that provide community-managed financial services;
Building the capacity of local microfinance institutions to improve systems and offer products that are better suited for the local clientele; and
The provision of basic primary health and education services.
The CLP’s centrepiece activity is the Asset Transfer Programme (ATP), which provides productive assets to the 55,000 poorest island char households in its working area. Beneficiary households receive a package of physical assets (mainly livestock) and an 18-month cash stipend worth a total of approximately Tk 20,000 (about USD 300), the equivalent of roughly one year’s household income.
CLP estimates that only 10 percent of its beneficiary households have a savings account with a bank or an NGO microfinance institution (NGO-MFI); formal insurance services are completely non-existent in the chars. As a result, opportunities to smoothen irregular household cash flow are limited and households regularly adopt severe coping strategies, such as the distress sale of assets, reduced food consumption and over-indebtedness, to meet consumption and emergency needs. In this context, the CLP aims to ensure that by the end of the programme, most poor char dwellers have access to appropriate financial services and that at least 100,000 char households have a safe place to save. In addition to its MFI Capacity-Building Programme – aimed at strengthening the systems and improving the product offerings of 12 local MFIs – the CLP explored various community-managed microfinance models in 2006. In 2007, it introduced the Village Savings and Loan (VSL)
model to its working area, ATP groups and targeted beneficiaries. By the end of the CLP in 2010, the Village Savings and Loan Programme will have established nearly 2,000 self-managed VSLAs that provide over 42,000 households with access to sustainable, self-managed savings and credit facilities in very poor and remote areas of north-western Bangladesh.
This case study describes the process through which the CLP experimented with VSLAs; built a network of 10 implementing organisations around a coordinating agency with implementation experience; integrated the VSL approach into its multi-input programme; and facilitated the delivery of sustainable, self-managed financial services to targeted extremely poor communities and households, at less than USD 8 per participant. The paper also examines the difficulties, risks and mitigation strategies in introducing the VSL model to pre-existing groups and targeted beneficiaries within a multi-input programme, as well as the added value of promoting Savings Groups within a large-scale, rural livelihoods programme centred on an asset transfer approach. This paper demonstrates that the opportunity to save and borrow frequently in small, flexible amounts has supported and protected the increased asset base of ATP beneficiaries and enabled them to engage more effectively in the various market development initiatives of the CLP. Primarily, CLP beneficiaries that are members of VSLAs exhibit increased savings, reduced loan repayments and improved household cash flow management; increased income; improved emergency coping mechanisms; and improved social status within the community.
This case study is based on a literature review of research papers, programme reports and notes from the Chars Livelihoods Programme, an independent survey of 540 CLP beneficiaries conducted in January 2009, and the experiences of the authors, who fulfilled research, programme management and short-term consultancy roles with the CLP since 2006.