By Adam Hassan
When banks and ATMs close due to war and crises, it may seem at first glance that economic activity has ground to a halt. However, the truth is that local communities possess immense power when they organize their small savings.
This is where Village Savings and Loan Associations (VSLAs) come in—a simple system that has proven successful globally and is supported and developed by organizations working in the development sector. This system is not just a “fund” for collecting money; it is a “mini-bank” owned and operated by neighbors and members of the same community in a secure and reliable manner.
How does the system work in such a simple way? (The idea of the “iron box and three keys”)
Imagine that 20 neighbors in a village or displacement camp in Darfur or Kordofan decide to join forces. They don’t need banks or complicated paperwork; instead, they agree on the following:
- Weekly Meeting: The group members meet once a week under a tree or in a community center.
- Share Purchase (Savings): Each member contributes a very small amount called a “share” (e.g., 1,000 or 2,000 Sudanese pounds). Members can purchase from one to five shares each week, depending on their ability.
- Accounts Ledger: Each member keeps a small ledger in which they record the number of shares they purchased each week to ensure their rights.
- Absolute Security: All funds are placed in a metal safe with three different locks. Each lock is entrusted to three different individuals chosen for their trustworthiness. The safe can only be opened at the weekly meeting in the presence of all members!
How Do Members Benefit from the Funds? (Real-Life Examples)
The funds collected in the safe are not frozen but are divided into two types of support for the community:
- Microloans for Business Operations (Investment)
After two or three months of saving, the safe accumulates a substantial amount. Members who need money to purchase business supplies can apply for microloans, repayable within one to three months at a very low interest rate determined by the members themselves. > A real-life example from Darfur:
Amina (displaced person living in a camp with her neighbors): She applied for a loan from the fund’s savings to buy two cans of oil and cartons of soap to open a small shop in the camp. After two months, she sold the merchandise, repaid the loan with interest to the fund, and made a net profit which she used to support her family and buy new shares in the association.
A real-life example from Kordofan:
Ibrahim (onion farmer): He borrowed from the fund at the beginning of the planting season to buy seeds and fuel for his water pump. When he harvested and sold his crop in the local market, he repaid the loan and the principal, avoiding the need to deal with traders who impose harsh conditions.
- The Social Emergency Fund (Solidarity Fund)
In addition to saving shares, each member contributes a fixed, symbolic amount (e.g., 200 Sudanese pounds weekly) which is placed in a separate bag inside the fund called the “Assistance Fund.”
- How it works: These funds are not repaid but given as a grant or free assistance to any member facing an emergency (birth, sudden medical treatment, or death).
End of cycle: Profit distribution (Community Joy Day).
The association lasts for 9 to 12 months (a full cycle). At the end of the cycle:
- The fund is opened, and all the money is accounted for (savings + interest from loans).
- The money is distributed to the members, with each person receiving their full savings plus their share of the profits according to the number of shares they purchased throughout the year.
- A new cycle begins for those who wish to continue.
Why is the VSLA system the ideal solution for the Darfur and Kordofan regions currently?
- It doesn’t require electricity or the internet: It operates entirely with paper, ledgers, and a metal safe.
- It solves the liquidity crisis: It pools scattered funds and puts them into commercial activity within the neighborhood or village.
- It builds trust within the community: It brings displaced people and local residents closer together, fostering relationships based on commercial and humanitarian cooperation.
- It preserves people’s dignity: Instead of waiting for external aid, the community becomes capable of financing its own needs.
Supporting development organizations and their partners in this model, and training communities in Kordofan and Darfur to manage it, is the most practical plan to transform our communities from a stage of suffering and dependence on aid to one of production and self-reliance.
