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Linkages between CARE’s VS&LAs with Financial Institutions in Rwanda

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CARE’s Village Savings and Loan (VS&L) methodology is a non-institutional savings-led alternative to credit-centered microfinance institutions. This model has proven especially successful and sustainable in poor, rural areas with bad infrastructure and low population density resulting in small loans and high transaction costs. Based on a belief that savings rather than lending services are more appropriate for and in higher demand by the rural poor, VS&L programs have emphasized savings mobilization through unregulated and usually informal groups that depend on member savings for their loan fund capital rather than external loans. One of the exceptions is the VS&L program by CARE Rwanda, in which Savings and Loan Associations (SLAs) are linked through federations (called Intergroupments, IGs) to external loan funds (provided by CARE) at the Banques Populaires. The main purpose of this case study is to critically document and analyze the SLA linkage to external credit in Rwanda. Taking into account the Rwandan context the case study describes the rationale for the linkage to external credit, lists strengths and weaknesses, and offers recommendations for VS&L and other savings-based financial service practitioners considering to replicate or adapt this model.

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