Saving culture rise in Karamoja

In Karamoja the majority of the population lives in deep poverty with few livelihood options. Promoting a culture of saving that enables people to save for their children’s education, income generating activities, emergencies or other life events can therefore seem challenging.

©Mai Gad
Longes Theresa (purple) is a member of Nakeruman VSLA in Lokirimy village, Namulatuk SC, Nakapiripirit District.

DanChurchAid (DCA) has together with implementing partners introduced the Village Saving and Loans Associations in Karamoja with great success. The saving groups have enabled the poorest communities’ access to loans and a saving scheme enabling them to respond the most immediate needs as well as saving for the future.
The VSLA groups is one out of several components in the project “Livelihood Protection and Enhancement through the Development of Productive Asset in Nakapiripirit and Amudat Districts, Karamoja Region”, implemented by DCA and partners with a grant received from the Government of Uganda (Karamoja Livelihood Programme, KALIP) and the European Union under the 10th EDF.

Women empowerment through financial access

Aside from being affected by the highest poverty rate in Uganda, Karamoja is also faced with high gender inequality with scarce opportunities for women to participate in the formal and informal labor market.
“Before it was impossible for us women to borrow from a man, but now we can finally borrow and make financial decisions for ourselves and our families.The little we save has helped us invest in small businesses, which most importantly allow us to pay our children’s school fees..,” says 41 year-old Longiel Joyce.
“I recently borrowed 30.000 Uganda shillings to invest in sorghum and was able to earn 10.000 Uganda shilling,” Longiel says.

Another member of Nakeruman VSLA group is 60 year-old Longes Theresa. Longe’s VSLA group consists of 23 women and 7 men, who have all been trained in the VSLA methodology including the election of committee members and appropriate record keeping: “The group has helped me take my son to school. I took a loan to buy and sell tomatoes, which enabled me to pay for his transport. My next idea is to buy cassava and sell it at a higher price at our local market. Before I could not borrow money anywhere, I would like to continue saving in the VSLA,” Theresa says.

When emergencies strike

In addition to the loan taking and saving schemes, the VSLA groups in Karamoja have agreed to establish a welfare fund in case an emergency strikes or a member need acute assistance from the group. The loans from the welfare fund are paid back without any interest.
“The welfare fund is a self-insurance mechanism which can provide members with a small amount in case of an emergency,” says Benedict Lokiru, DCA-GLRO Project Coordinator. Benedict adds that the VSLA’s has the advantage of offering members with savings, insurance and credit services, which the members could never access in formal financial institutions.

VSLA saves lives

Karamoja’s harsh climate is characterized by frequent periods of prolonged droughts, which has serious impacts on the harvest and thereby people’s livelihoods.

In such situations, being a member in a VSLA group, can become lifesaving. Nangiro Theresa and her 8 children in Amudat district experienced how her VSLA membership helped them through the drought.
“The VSLA has helped us during a period of hunger,” says Theresa, who was able to take a loan in the local VSLA group, from which she bought sorghum and sold it with profit.“If it was not for the VSLA, my children and I would have starved to death. We survived because of this group,” says Nangiro Theresa, a mother to 8 children.

VSLA’s encourages saving culture and reduces alcohol intake

The VSLA works not only to encourage a saving culture; it also has the positive impact on the communities’ alcohol consumption, which is a widespread problem in Karamoja.
“Before the VSLA I took much more alcohol, but now I have to think more about how I spend my money in order to be able to save up money every week in the VSLA, it has made me drink less alcohol,” member of the VSLA in Nanganit village, Lokut James admits.
“The VSLA was introduced to us at the right time, as we live far away from banks and do not have money to open an account. I believe our community will continue to save in the VSLA, even when we are no longer supported by DCA and partners” says Lokut, who is planning on taking more loans in the VSLA group.

A bright future for VSLA’s in Karamoja

There is a big chance that the VSLA groups will continue to save even after the project support ends. It is estimated that over 90 per cent of groups continue to operate more than five years after receiving training.
“In Karamoja we have introduced the VSLA methodology as a response to the gaps within the microfinance sector in the region underserving the most remote and poorest communities. The microfinance sector in the region has high requirements with regard to collateral, legal requirements and high interest rates, says Lokiru who views the future of the VSLA’s as being a very bright one.
This publication has been produced with the assistance of the Government of Uganda and the European Union. The content of this publication are the sole responsibility of DanChurchAid and can in no way be taken to reflect the views of the European Union.