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David Roodman's Microfinance Open Book Blog

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Nicholas Kristof's column today is about the promise of microsavings. He starts by describing what must be a Village Savings & Loan Association (VLSA), operated by Catholic Relief Services in Nicaragua:

“We used to buy a three-liter bottle of Coke every day,” recalled Socorro Machado, a 49-year-old homemaker in a village here in northwestern Nicaragua. That was a bit less than a gallon, and the cost of $1.75 consumed a large share of the family’s budget.

Then Catholic Relief Services, an aid organization, arrived in the village with a new program to promote savings. It provided a wooden box with a padlock and organized savings groups of about 20 people who meet once or twice a month, typically bringing 50 cents or $1 to deposit in the box.

Some of the money is lent out to start a small business, but the greatest benefit of these programs seems to be that they provide a spur to save.

“Now we buy a bottle of Coke just once a week, and we put the money in savings,” Ms. Machado said. She saves about $5 a month in her own name and another $5 a month in her son’s name and has plans to buy a computer for him eventually.

Kristof also cites the Dupas & Robinson randomized study showing benefits of microsavings for entrepreneurs.

For more on VLSAs, see the notes from my interview with Hugh Allen; this fine report from CARE, which pioneered this particular approach to savings groups; or this CARE video. On MatchSavings, which Kristof mentions, see this post, which contains a video of an excellent discussion.

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