Access to finance is one of the major challenges faced by rural youth in Tanzania. They need capital to cover planting, breeding and harvesting expenses, and to improve production capacities and assets. However, many great ideas remain pipe dreams due to a lack of funding.
Banks and micro-finance institutions (MFIs) often hesitate to support rural enterprises, particularly if these enterprises are owned by young people. In some cases, financial institutions charge high interest rates and require fixed collaterals for loans. This excludes young entrepreneurs. In a bid to ease access to financial services, SNV’s Opportunities for Youth Empoyment (OYE) project funded by Mastercard Foundation has encouraged young people to form Youth Savings and Loan Associations (YSLAs) in the three programme countries: Tanzania, Rwanda, and Mozambique.
YSLAs are emerging as a successful finance model for young people. Saving groups are formed at the community level to financially and socially empower poor and vulnerable young people to pool their own limited resources. It allows them to improve their livelihoods and household economies with no external cash injection. In the meantime, participating young people receive training in financial management skills.
On 20 October 2016, the last day of the OYE annual meeting in Arusha, OYE teams visited an YSLA group meeting in the Ngurundoto village, Arusha. The OYE colleagues were inspired and impressed by this trend-setting group.
Ngurundoto VSLA member contributing his monthly share
“Starting a new YSLA is simple,” said Awadh Milasi, OYE Tanzania Agriculture Project Manager. “We appoint trained community-based agents to guide the formation of the groups, train them and offer technical assistance for 12 months, after which the groups become self-sustainable and self-driven.” The Ngurundoto group is now in the development phase. The village agent meets the group twice a month. In time, the visits will become less frequent and the YSLA will become self-governing.
So far, the association's members have been able to borrow and repay their loans. Some have been able to expand their farm activities, while others have invested in small businesses that support their families. The lending scheme reinforces group dynamics, financial responsibility and the participants' entrepreneurial drive. “I am now doing my best to invest in productive assets and income generating activities to be able to diversify my sources of income. I hope I can inspire other young women in my village to join, take advantage of the opportunities that YSLAs offer and be confident enough to make key decisions for their lives.” said 25-year old Rachel Eduard, an Association committee member.
Committee members perform an audit before sharing money with members.
OYE staff from Rwanda and Mozambique commented on the positive experiences and lessons learnt: “This group is well organised and has dedicated leadership,” said Zondai, Youth Development Advisor from OYE Mozambique. "The members are demonstrating discipline and efficiency, values that will contribute to their success. I can only wish them the best!”
“In Rwanda, with our youth cooperatives, we are trying to adapt this methodology to the local context and the renewable energy sector and create flexibility in both the amount and the duration of the loans made. We hope to be sharing similar results very soon”, Polycarpe Nshimirimana, OYE Business Skills and Enterprise Development Advisor from Rwanda stated.
The success of Youth Saving and Loan Associations has also led local government authorities to make loans accessible to young people. This is a promising sign showing that empowering youth in their own financial operations can be a good strategy to break the barrier between financial services and rural youth.
the group after the visit