A Comparative Study of the Credit with Education (CWE) and the Village Savings and Loans (VSLA) Methodologies of Microfinance Services on Rural Livelihoods

Abstract

The study was set up to compare the Credit with Education (CwE) and the Village Savings and Loans (VSL) methodologies of microfinance services and how they influence rural livelihoods. The field survey methodology was involving both qualitative and quantitative approaches. Common services (financial and non-financial) offered to client groups in both the VSL and CwE models as implemented by Plan Ghana-an international non-governmental organization (INGO) and partner local non-governmental organizations (LNGOs) in the case of the former and the latter by the Bawjiase Area Rural Bank (BARB) in the Awutu district of the Central Region of Ghana. It then assessed in comparative terms the influence of these microfinance models on clients’ livelihood strategies and activities, the resulting outcomes and ultimately their impact on clients as search for livelihood. In all 202 respondents were sampled, one hundred and one in each category and the data collected in the month of March, 2012. Descriptive statistics were mostly employed for the analysis of the data. The study found that apart from the financial intermediation, social intermediation services such as enterprise development, gender trainings, reproductive health, diarrhea prevention and management in children and infants, importance of breastfeeding, infant and child feeding, HIV/AIDS prevention, malaria prevention and management and family planning were offered in both programmes. In all, services such as gender trainings; agro-forestry practices and cottage industry as livelihood strategies; and livelihood outcomes including enterprise expansion, bulk purchase for cost reduction, accessing cheaper credit sources, initiating new enterprises, selling in new markets, investment in structures for marketing and production, clients preferred places of savings, amounts saved, calculation of profits based on costs and earnings, having fixed location for sales and production purposes, allowing credit sales, household diet characteristics and perception of limited credit availability all showed significant differences between the CwE and VSL clients and by extension groups. Overall, the study found that the programmes had positive influences on clients’ livelihood strategies and activities, the outcomes of those strategies and activities and the eventual impact. The study recommends that topical issues such as gender that alter power relations within households positively, food security that innovatively link households of programme participants directly into food chains with long term positive effects on nutrition of children in particular and the incorporation of health products such as the NHIS should be intensified in programmes. Also, programmes such as the VSL contemplating linking groups to formal microfinance institutions (MFIs) and/or commercial banks should assess the repayment capacities of groups incrementally, and credit extended accordingly in order to avoid defaults and promote sustainability.