Project for the Reduction of Vulnerability

Lessons from Micro Bankers Trust Banking Model in the Reduction of Poverty and Vulnerability
Social Protection A CARE International in Zambia Learning Product 2009

CARE Zambias work in Social Protection

Since 2004, CARE Zambia has been working through a Program Partnership Agreement (PPA) with the UK Governments Department for International Development (DFID) to implement a number of Social Protection projects, aimed at increasing the capacity of institutions and the most vulnerable in society to better manage risk associated with food insecurity, destitution and HIV and AIDS. The PPA programme reflects CARE Internationals vision which seeks a world of hope, tolerance and social justice where poverty has been overcome and people live in dignity and security. An estimated 64% of Zambians are poor, mostly living in rural areas (Central Statistics Office 2007) on less than US$ 1 per day. The PPA programme has focused on addressing this through a Social Protection agenda that supports both the achievement of Millennium Development Goals one, two and six, and the Government of Zambias Fifth National Development Plan (FNDP). In this context, CARE Zambia regards Social Protection as a holistic approach to protecting and promoting the livelihoods and welfare of vulnerable groups through coordinated policies and transfer mechanisms such as cash, physical resources, training and in-kind contributions. The vulnerable groups targeted include: Low capacity households including widows, the disabled, the old, and other marginalized, low-income households, and informal sector operators; Incapacitated households with no self-help potential, including mainly households affected by HIV/AIDS; Child-headed households and street children

Key Lessons
Work with a proven micro finance model Prepare beneficiaries for implementation Aspects of Micro-finance are not stand alone Sound M & E and reporting systems Viable financial sustainability

priorities of gender equity, HIV and AIDS mainstreaming, advocacy and policy influencing, and good governance. As overall project manager of the PROV, Harvest Help subgrants to 3 local NGOs: the Micro Bankers Trust (MTB), the Mwanka Rural Development and Environmental Foundation (MWANKA), and the Mthila Kubili Sustainable Agricultural Project (MK-SAP). Prior to PROV, Harvest Help and the same NGOs were already working together in Eastern Province where they had gained local knowledge and experience on micro-finance and livelihoods in terms of what worked, what did not and of greatest importance for learning, why.

As part of the PPA, a series of learning products have been developed as a means of sharing knowledge and promoting greater understanding with a wide spectrum of stakeholders including policy makers, Government, donors, and civil society. Background to the project In 2005, at a time when CARE was seeking cutting-edge and innovative projects which met its Partnership Fund requirements, Harvest Help, an International agricultural NGO working in Zambia, approached CARE with a detailed project proposal the Project for the Reduction of Poverty (PROV). PROV was indeed a cutting edge and innovative project which linked micro-finance directly to business skills, agricultural training and the diversification of livelihoods in a resourceful new way. PROV also supported the PPAs cross cutting

CARE and MBT working with PROV local community and banking groups in Lundazi, Eastern Province The provision of funding by CARE-DFID allowed those involved to build upon experiences and lessons learned in the design and implementation of the PROV.

Social Protection

Ownership
Without building a tangible sense of beneficiary ownership there can be no development of any real local agency. With PROV, three years on, while continuing technical support is essential in so marginalised areas, the business ideas and activities...the making of loans and savings... the innovations and networks now emerging, are all locally driven and owned CARE Development Coordinator, Chipata.

HIV/AIDS and Food Security Issues Integrated to create a better understanding of the interaction between HIV/AIDS and food security among the target groups, to reduce their vulnerability to the impact of the epidemic Increased capacity of local organisations to promote effective, locally driven developmental organisations able to respond to the needs of their members.

Micro Bankers Trust (MBT) The Banking Model Explained

Accumulative Savings and Credit Associations (ASCAs)

Guiding Principles and Values of PROV

Targeting of the poor Full participation of target groups / beneficiaries Equality of access to activities and benefits regardless of gender, age and ethnic group Promoting sustainable solutions Transparency and accountability A transformation approach

ASCAs are the primary or first stage in the development of Village Banks (VBs), also known as Finance Savings Associations (FSAs). ASCAs provide the basic unit of financial association in a community by making available essential financial services primarily regulated savings and loans facilities to fund income generating projects. The explicit linkages made between access to finance, financial and business training, and the acquisition of income generating skills and other livelihood opportunities, provide a necessary cohesive framework within which the project can operate.

Implementation Principles and Approaches

Investment in training at all levels: project staff, key community volunteers and individual beneficiaries. Effective teams: comprising project partner staff and community volunteers to mobilise community involvement and facilitate the structures required to support business activities amongst target groups. The teams will lead the process of encouraging and supporting enterprises. Appropriate, client driven services: including the provision of financial services, market information, business counselling and sustainable farming inputs. Also, the facilitation of critical linkages between fellow farmers, producers and with traders and local marketing systems at various levels. Collaboration and cost-sharing: PROV encouraged and facilitated collaboration through producer groups and outgrower schemes. As clients develop their initiatives they will move to cover the full cost of these services.

Project Outputs
A sustained increase in household food production to achieve an average increase in household food production of 50% (in a year of average rainfall) in order to enable poor households manage and reduce risks associated with food insecurity Increased diversity of household income aiming at achieving an average increase of household cash incomes of 30% in order to enable poor households to acquire the assets and cash income needed to meet their social economic needs and reduce their vulnerability during the times of disasters. Average income increased to US$ 1 /day equivalent representing an average 60% increase of overall income at project start - with half of this coming from new sources.

Kids can now play and they even go far, of which previously they could stick around waiting for food and they were simply [too] weak to play ASCA Members, Sikatengwa, near Lundazi Self-regulated and self-accountable, ASCA status is only granted to groups of individuals who have collectively demonstrated their finance, management and organisational abilities to the MBT, through time and after rigorous training. Following an initial set-up period, when MBT provided both credit and savings mobilisation to ASCAs during their formation, they are then funded solely by members. Members can also set interest rates, which are usually set at 12% to be paid back over a 6 month period, appraise loan applications and limit amounts of loans paid to individual members.

A CARE International in Zambia Learning Product

The benefits generated from the ASCA model tend to selfadvertise the advantages of belonging to such an association, which prompts other groups to form as a first step in achieving ASCA status. A further development, perhaps largely unforeseen, is the opportunity now made available in some project areas for non-members to join an ASCA directly on the payment of a cash fee or goods-in-kind. New members are monitored and supervised by existing members who also instruct them in the perquisite financial skills (which many will already be familiar with via community wide training workshops). Local Volunteer Extension Staff have also been trained to further enhance the stand-alone and self-learning objectives of the project.

Key Indicators of Success

Increase in the formation and establishment of VBs Accurate ASCA records of financial services with minimum external supervision Increased loan portfolios Increased numbers of ASCAs joining VBs Increased levels of savings Increased numbers of people borrowing More product windows being developed (ie variety and scope of services).

Its this integration of banking and skills training which has been a key project strength much stronger than just standalone micro finance inputs which often do not work Implementer, Mthila Kubili Sustainable
Village Banks/FSAs The graduation from ASCAs to a VB/FSA is often not a quick process, and can take two years or more to realise. In both Lundazi and Chipata, FSAs have now been established by members of ASCAs, following their successful meeting of specific criteria set by the MBT for the establishment of an FSA. The core business of an FSA is the provision of external loans and MBT also provide such set up capital, allowing far larger sums to now be borrowed in a pull down process to ASCAs or individual bank members. On an ongoing basis, funds raised via the sale of shares provide the money for the VBs to use as loans for its shareholders, though this, together with increasing actual savings, can prove to be a slow process due to a number of factors, but principally lack of disposal/saveable cash flow and the pay back of outstanding loans. There further exists, as with the ASCAs, a members guarantee of each other against fraud. However, as the following from Chipata demonstrates, VBs/FSAs perform a number of functions for the community in addition to that of a banking association.

Lessons Learned
M&E and Reporting Systems are an absolute necessity for projects such as PROV, where there are layers of subgranting, activities and outputs involved, to have properly structured, transparent and verifiable reporting systems in place, meeting agreed reporting and M&E/OVI criteria through time, centrally collated and disseminated. Working with a proven micro-finance model implemented by a specialist micro-finance/banking NGO gives a project such as PROV a key implementation advantage. Financial, goods and service benefits have, as predicted, primarily stayed with and revolve within beneficiary communities, thus providing local foci for socio-economic development. Trickle down benefits have a better chance of occurring when such an integrated model as PROV is utilised, and where communities are geographically distant from larger conurbations. Preparing beneficiaries prior to implementation through a sufficiently in-depth and well-managed sensitisation and capacity building process. As such, beneficiaries and communities were better able to appreciate and respond to its aims and objectives, and their relation to it.

Financial Savings Associations Chipata (formed April 2008) MBT Report December 2008
Registration of the FSA is in progress, where payments have already been made to acquire a certificate of association under the Ministry of Commerce, Trade & Industry In addition, the FSA has: sourced credit from MBT which was then loaned to the ASCAs established linkage with the Ministry of Agriculture allowing ASCAs to access inputs under the Governments fertilizer support program (FSP) started collecting shares capital from its members to be used later next year as a revolving loanfund , to enhance financial sustainability opened an adult literacy school program with to enhance reading and writing skills amongst its members and as well as to further enable members to run their various income generating enterprises in profitable manner a support group of all those members who are HIV positive. These members usually share their experience with the rest of the membership so that other should not fall into the same situation.

Social Protection

A CARE International in Zambia Learning Product

The micro-finance aspects are not stand alone but integral drivers toward achieving overall PROV objectives which are: increase in household food production, integration of HIV and AIDS and food security issues, increased diversity of household incomes, increased capacity of CBOs and communities. Target beneficiaries, communities and CBOs were involved at all stages promoting a sense of ownership and partnership, building local capacity and further developing/empowering community organisations in technical skills, reach, agency and responsibilities. The business ingenuity of beneficiaries, their identification and diversification of investment and employment opportunities, creation of internal and external networks and the ability to self-manage individual and collective wishes and needs, provides striking evidence of the overall effectiveness of the models used, their implementation and ongoing support strategies. Financial Sustainability of such a project is dependent upon a number of inter-locking external and internal factors, with externalities invariably out of the control of the project or beneficiaries, such as flood, poor harvests, seasonal influences, fuel and commodity price rises, etc. Internally, a lack of collateral for loans, difficulty and length of time to build adequate levels of savings to provide revolving loans, and lack of timely repayments can all threaten the model. The growth or decline of ASCAs and of membership offers a good indicator of general socio-economic trends or cycles. However, as we have seen, initial entry to ASCAs can be made in-kind rather than cash, allowing potential entry to those who might otherwise be barred from it. Whatever the fluctuations in the formation of savings groups, or otherwise, the demand for ASCA/FSA services remains constant. Given such variables, however, the initial estimate of a 3 year implementation to final hand-over period has been revised, with a minimum of a 5 to 6 year cycle, for this type of project now being advised. HIV and AIDs and Food Security Workshops and support groups around HIV/AIDS/PLHAs have been a notable outcome of the project, with the fact that improved food security reduces vulnerability to HIV/AIDs more fully

Loveness Sinda, ASCA Member Sikatengwa Area, Lundazi Loveness Borrowed K300,000 from her ASCA with which she started a small business, buying 50kg of salt,2 cartons of sugar, 2 tins of kapenta, 2 cases of soap. She has also managed to buy uniforms and met other school requirements for her 3 children. She has built a house. She now has a working capital of K250,000 Being an ASCA member has given me the opportunity to do so many things for my family. I now am having an education too and know many more things which help me and my neighbours to live better lives. Above all I am happy to have paid back my loan as well, Loveness

appreciated. Via ASCAs and now FSAs, communities are dealing more openly with the impact of HIV/AIDs at individual, household and community levels, with moves to mitigate stigma, and the starting of community and household support groups. Food intake has increased to an average of 2 or 3 meals per day, as has range and quality, including kapenta, chicken, fresh fish and mealie-meal a sure indicator of overall financial and resource improvements.

End Note: The Project for Reduction of Vulnerability targeted low capacity households and endeavored to promote their livelihoods and welfare by linking them to innovations which provided them with disposable incomes. By providing mechanisms for alternative livelihood through village banking and savings to this population category, the Project contributed to protecting the vulnerable from further destitution and chronic poverty as recognized in the Fifth National Development Plan under social protection. The project therefore demonstrated that support to vulnerable communities can contribute to strengthening a communitys resistance to vulnerability. Success at this stage on the vulnerability scale helps build a barrier to stop communities from falling back into more vulnerable situations. The Project for Reduction of Vulnerability, as articulated in this learning product, demonstrates an effective response to chronic poverty that should be a part of a holistic approach to social protection.

Department for International Development

Republic of Zambia