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Village Savings and Welfare: Evidence from Zambia
Several factors have been cited for the low welfare levels in Zambia, among them low production and
hence lower household incomes. Lack of access to credit and finance have often emerged as important
obstacles to increased production. The encouragement of savings groups is seen by many as an
alternative to solving the limited access to credit and financing among poor households with no
collateral to use if they are to borrow from formal credit institutions. We examined the impact
of participation in savings groups (specifically VSLAs) on household welfare and the results show the existence of significant and positive consumption effects. Precisely, as much as 19 to 38% of weekly total household expenditure, and 15 to 17% of weekly per capita household expenditure, could be attributed to the households’ participation in VSLA interventions.
