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					                              CARE International
                                 in Uganda




                                 Proposal for


                                 A
                  National Support Mechanism
                       for the promotion of
                Village Savings and Loans (VSL)
                     mechanisms in Uganda



                               December 2005


                                  DRAFT 3
                                 Proposal to
                                DFID/Uganda

Contact:
Uwe Korus
Director of Programmes
Tel.: +256 (0)41 258 568/9
Email: korus@careuganda.org
        cuhq@careuganda.org
NSM-VSL                                                   Proposal                                                 CARE Uganda
                                                       Draft 3 – Dec 05




Table of contents
Table of contents .............................................................................................................. 2
Acronyms .......................................................................................................................... 3
Summary .......................................................................................................................... 4
1 Background................................................................................................................ 5
2 CARE International in Uganda ................................................................................... 7
3 Objectives .................................................................................................................. 9
  3.1    Goal .................................................................................................................... 9
  3.2    Intermediate Results ......................................................................................... 10
  3.3    Outputs ............................................................................................................. 10
  3.4    Justification ....................................................................................................... 10
4 Critical Assumptions / Risks ..................................................................................... 11
5 Implementation Mechanisms ................................................................................... 13
  5.1    VSLA Steering Committee ................................................................................ 13
  5.2    Central Support Facility..................................................................................... 14
  5.3    Implementing Organisations (IOs)..................................................................... 15
6 Implementation Strategy .......................................................................................... 15
  6.1    Phase 1: Technical Assistance (Jan-Dec 2006) ................................................ 15
  6.2    Phase 2: Documentation and Promotion (Apr 2006-Jun 2007) ......................... 16
  6.3    Phase 3: Consolidation & Expansion (Nov 2006 – Aug 2007) ........................... 16
7 Capacity Building ..................................................................................................... 17
  7.1    Capacity Assessments...................................................................................... 17
  7.2    Organizational Capacity Building ...................................................................... 17
  7.3    Training of Trainers (TOT) ................................................................................ 17
  7.4    Management/supervision .................................................................................. 17
8 Monitoring and Evaluation........................................................................................ 18
9 Exit Strategy ............................................................................................................ 19
10    Budget.................................................................................................................. 20
Annex 1: Table of potential indicators ............................................................................. 21
Annex 2: Efficiency Norms and Benchmarks................................................................... 22
Annex 3:      Impact Evaluation ...................................................................................... 23
Annex 4:      Area Mapping ............................................................................................ 25




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Acronyms
CBO        Community Based Organisation
CSF        Central Support Facility
CSO        Civil Society Organisation
FSDU       Financial Sector Deepening Uganda
IDP        Internally Displaced Persons
IGA        Income Generating Activities
IO         Implementing Organisation
JENGA      Joint Encouragement of New Gainful Activities – CARE Uganda
MFI        Micro-Finance Institutions
MIS        Management Information System
MMD        Mata Masu Dubaru (Women on the move) project CARE Niger
NSM        National Support Mechanism
SACCO      Savings and Credit Cooperative
SC         Steering Committee
SPM        Selection, Planning and Management (of IGAs)
TA         Technical Assistance
VS&L(A)    Village Savings & Loans (Associations)




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Summary
Project Title
                National Support Mechanism for the promotion of Village Saving and
                Loan Mechanisms in Uganda
Project
                NSM – VSL
Acronym
Project
                January 2006 – August 2007
Duration
                                         Objectives
Goal             Provision of financial intermediation services to 200,000 poor and
                 marginalised people in Uganda through VS&L mechanisms by Dec
                                                2009.
IR1               Establishment of a VSLA Steering Committee for the promotion,
                 expansion and quality control of agreed and proven best practices
                                      in VS&L by August 2006.
IR2                Establishment of a Central Support Facility providing technical
                   assistance and resources to service providers involved in the
                  implementation of VS&L mechanisms throughout the country by
                                             August 2007.
Outcomes           3000 VSLAs formed under this initiative have completed action audit
                   90% of those VSLAs have re-grouped after the first action audit
                   60,000 VSLA members have access to loans through the VSLA
                   VSL documentation center established
                   Joint MIS established between CSF and Implementing Organisations
                    Client based quality monitoring and control mechanism established
                   Adaptations of basic VSL model to specific settings / client groups (e.g. IDPs)
                   GoU policy frameworks and poverty eradication strategies recognize VS&LA as a key
                    mechanism of financial intermediation for the poor.
Outputs            Technical assistance provided to up to 15 implementing organisations
                   300 trainers and 45 training supervisors trained and certified
                   3 national events held for promotion of VSL methodology / model
                   Best practices documented and disseminated
                   Publications and videos produced for the promotion of the VS&LA model
                   1 series of exchange visits between implementing organisations and other interested
                    stakeholders organised per year.
Project Area
                National
Project
                FDSU, potentially Plan International and others
Partners
Implementing
                15 Implementing Organisations selected by CARE, FDSU and DFID
Partners
Beneficiaries   Direct
                                   60,000 members of VSLAs: rural poor / vulnerable
                Indirect
                                   300,000 people (households of VSLA members);
                                   population in approximately 30 districts
Budget          DFID
                                   GBP 206,478
                CARE
                                   GBP 44,916
                Total
                                   GBP 251,394
Other Resources (for / from
                            GBP 1.765 million
implementing organisations)



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1 Background
Since 1991, more than 225,000 poor women in rural Niger – people deemed “unbankable”
by traditional finance institutions – have amassed $5 million in circulating loan capital.
Residents of the second-poorest country on earth, they have accomplished this through a
unique, self-managed, self-financed, community-based, women’s savings and loan group
methodology developed by CARE. With this methodology, called Mata Masu Dubara
(MMD) in Niger1, CARE and its partners are now reaching over 700,000 VS&LAs clients in
22 countries in Asia, Africa and South America.

The MMD methodology evolved over time, but is basically time-bound accumulating savings and credit
associations (ASCAs). It builds from a rotating savings and credit association (RoSCA), which is commonly
used by women in Niger, but has added some twists. Unlike RoSCAs where members make contributions
and get fixed payouts periodically on a rotational basis, MMD members make contributions but borrow
month-long loans, which are repaid with interest.
The MMD type ASCAs are time bound, i.e. forming for a specific cycle - usually 9 to 12 months – and are
established with a specific objective for any given cycle. These objectives might include a religious
holiday, the end of the cropping season when there is no money, or the beginning of the school term, all
events which require funds. Once the objective is achieved, the ASCA divides the portfolio equally among
the members. The groups usually reconstitute immediately, with members having the right to leave the
group if they wish and new members being inducted.
This periodic distribution of assets, and reconstitution of the group, with the possibility of membership
changes, is a unique feature of the MMD type ASCAs. Stuart Rutherford2, in The Poor and Their Money
refers to it as an “action audit”. It is called an audit because it plays some of the same role that an annual
financial audit plays in a formal enterprise, presenting an opportunity for everyone to agree on the
financial results, in a manner of speaking, “closing the book” on the past, and starting again at zero, or
from a starting point that everyone agrees on.

The action audit seems counter-intuitive to many. It seems to be the unnecessary breaking up of a
financial institution that is functioning well and meeting poor people’s needs. In fact, it addresses and
largely solves the problem that confronts many owner-managed financial institutions: after a while, no
one can agree on what resources belong to whom.
                                                                           3
Grant and Allen characterize the MMD program, despite its many limits , as a very simple methodology
and one of the purest forms of true financial intermediation to meet the financial service needs of poor
rural areas. They found the methodology particularly well adapted to areas with weak economic activity
that cannot be served by more formal institutions, because it is simple, self-sustainable and inherently
             4
transparent. Reports from different MMD type VSL&A programs around the globe tell how especially
women were empowered to advocate for better schooling for their daughters, to demand greater
resources from village or district leaders, or even to negotiate sexual relations with their husbands.

Country-specific evaluations and studies, and results certainly show that VS&LAs can be a
powerful catalyst for women and other lowest income populations to expand beyond their
groups’ initial focus on savings and credit in ways that empower members and allow them
to establish their own agenda for change.

Not only do VS&LAs build capital and increase women’s and households’ income, they
combine these financial services with education, awareness-raising, and training in vital
development issues such as women’s rights, health, education and HIV/AIDS.

1
    This Hausa phrase means “women who make things happen” or “women on the move.”
2
    Rutherford, Stuart, The Poor and Their Money, DFID/OUP January 2000
3
  The authors mention in particular: small loan size compared to required business investment, difficulties to
use excess savings or to respond to excess loan demand, informal nature of VSLAs hinders possible linkages to
formal financial institutions even for individual members
4
  William Grant & Hugh Allen: CARE’s MMD Programme in Niger – Successful Financial Intermediation in
Rural Sahel; Journal of Microfinance, October 2002


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In Mozambique and Zimbabwe, CARE has adapted the MMD methodology over last five years to the
specific needs of people affected by HIV/AIDS. Group sizes are smaller, training and meeting schedules
are adapted to special needs of the group members, psycho-social counselling is part of the group
meetings, groups are highly networked and visible in the community in order to reduce stigma.

With those relatively simple adaptations and a very targeted approach, CARE Mozambique is able to
mobilise over 300 VSLAs in rural areas with less than 20 trainers every year.
In Zimbabwe, groups are not specifically made of people affected by HIV/AIDS but the groups have
special loan products for their HIV/AIS affected members and they provide collective psychosocial support
to those members.
In both cases the benefits to the members are significant with regards to mitigating the effects of
HIV/AIDS: better nutrition, timely access to health services, improved housing as well as reduced
inheritance conflicts and smooth “succession” of orphans or widows in the groups. 5

The set of best practice and process methodology for the formation of VS&LAs is been
summarized in a set of Manuals and Management Information System (MIS) tools jointly
developed and regularly up-dated by CARE and VSL Associates.6

In Uganda, CARE introduced the MMD model in 1998 through its economic recovery
program (JENGA7) in West Nile partially in response to very low access to financial services
in the West Nile Region. JENGA was responsible for establishing village level savings and
loan associations (VS&LA) based on the MMD model. VS&LAs in Arua, Nebbi, Yumbe,
Adjumani and Moyo currently serve approximately 45,000 people as often the only
available, accessible and/or reliable savings and credit facility.

In October 2003, FSDU commissioned an assessment of VS&LAs that had been started by
CARE in the West Nile Region, and were being transferred to a local association, CREAM.
The assessment found that while participants appreciated benefits similar to those
described above, the initial VS&LA model had evolved and mutated in many different ways.
Only few VS&LAs practiced the periodic “action audit” or distribution of assets, a key
element of the original model. Also, many of the VS&LAs had become complicated by
launching income-generating activities with group funds, and the ownership and
management of these activities was often opaque.

In order to develop and promote a consolidated model of VS&LA with proven best
practices, CARE, FSDU and CREAM in April 2004 launched a joint pilot in Moyo and
Yumbe districts, West Nile region. According to the pilot project’s Mid Term Review, the
“new” VS&LAs are following the consolidated model, consist of an average of 20 members
and mobilise savings of between UGX 100 to 500 per week per member or up to UGX
500,000 per cycle (9-12 months) with a net return on savings of up to 66%. The size of the
usually short term (1-3 months) loans varies mostly between UGX 5,000 and 30,000 with
10% interest per month. And most VSLAs do now carry out the action audit in the
recommended time/cycle. With those features, VS&LAs provide a service and benefit to
their members that is outside the capacity of any of the existing formal financial institutions
(banks, MFIs, SACCOs). This pilot project is designed to end in March 2006.

As experienced in CARE’s initial JENGA programme in West-Nile, this pilot with the
consolidated VS&LA model still shows similar and some new inherent problems and
challenges of rapid expansion. There is the risk of a “model drift” or gradual deviation from

5
  Progress and evaluation reports of the Zambezia Self-Managed Financial Services Project, Mozambique, and
the Kupfumu Ishungu Project, Zimbabwe, 2003-2004; also see CGAPP website publications.
6
  VS&LA Training Guide For Associations that Use Written Records, Version 1.2 - September 18th. 2005; see
also www.vlsa.net
7
    Joint Encouragement of New Gainful Activities



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a core set of proven best practices. In many cases this leads to an over-dependency of
groups on the supporting agency, including too much (esp. material) support undercutting
the envisaged savings culture and group ownership. And there are still recurrent attempts
of other development agencies of transforming VS&LAs into income generating groups (i.e.
investing accumulated savings into common property assets) or of extracting the savings
from the groups for other microfinance schemes beyond the control of the groups.

Those observations call for:

    1. Defining and aggressively promoting a model that includes not only good practices
       at the group level, but incentives at the level of implementing partner for supporting
       the groups in adopting the good practices. For instance, implementing partners are
       likely to see the creation of totally independent groups as working themselves out of
       a job, unless incentives reward the partners for achieving that result.

    2. Much better monitoring systems need to be put in place which signal problems
       early; such a monitoring system is challenge given the diversity of implementing
       partners, the remote locations of groups, and the imperative of not adding significant
       additional administrative costs to the partners.

    3. Implementing organisations to recruit and support professional staff at all levels
       (including trainers) rather than volunteers in order to ensure a higher level of
       technical service quality. This relates also to: improved staff efficiency, simplification
       of the group training system; the establishment of a stronger supervisory structure,
       use of a simpler approach to record-keeping and MIS.

A number of agencies have visited West Nile and started similar activities in other regions
based on the consolidated model as piloted by CARE, FSDU and CREAM. The interest in
VS&LAs is great, but a quick field visit is not sufficient to allow transfer of the skills
necessary to carry out a successful programme.

A more systematic approach to the expansion of this model in Uganda as proposed in this
new initiative by CARE International in Uganda based on concepts and strategies jointly
developed with FSDU is therefore necessary.


2 CARE International in Uganda
In Uganda, CARE has acquired significant experience with both the direct implementation
of VS&LA training programmes and the provision of technical support services to
implementing agencies. Concurrent to transferring the technical support capacity from its
JENGA project to its local partner (CREAM) in West-Nile (see above), CARE introduced
VS&LA in Northern Uganda through its Reintegration, Employment and Income
Development (REIN) project (2000-2002).

REIN was a two years emergency recovery project implemented in Gulu and Kitgum districts. Its aim was
to establish a sustainable foundation for the social and economic rehabilitation through participation in
employment (road work), income generating and savings mobilisation activities so as to stimulate the
local economies. The project used an integrated approach of injecting cash into the community through
cash for work approach where community members offered their labour to open up community roads,
mobilising them to form VS&LAs that encouraged them to save their wages and business skills training
that helped them to invest the money in profitable ventures. Through REIN approximately 8,700 IDPs
have been introduced to the VS&LA model and by the end of the project over 100 VS&LAs had started
(with 62% completed) a first cycle of savings and loans.




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CARE used the lessons learnt from REIN and JENGA projects to support the Community
Resilience and Dialogue (CRD)8 consortium as well as 9 of its local partners to integrate the
VS&LAs model into project activities with conflict and HIV/AIDS affected populations.

CRD interventions include peace building, HIV/AIDS and psychosocial support programming for conflict
and HIV/AIDS affected communities of Uganda. The objective of integrating the VS&LAs into the three
thematic areas is to mitigate and reduce the socio-economic impact of war and HIV/AIDS among the
conflict affected communities of Uganda. CARE worked with the implementing agencies on wider
conceptual and strategic issues related to socio-economic empowerment while facilitating the formation of
169 VS&LAs with a membership of 4,485 in the districts of Gulu, Kitgum, Lira, Kasese and Bundibugyo in
one year. By September 2005 about half of those groups carried out a first action audit.9
Currently, CARE does integrate the consolidated VS&LA model into its agriculture
marketing and business service development programmes in the Kigezi and West-Nile
regions. We also provide training and financial support to Civil Society Organisations
(CSOs) in Gulu that are including this model into their CBO10 capacity building programmes,
and we partner with CSOs operating in at least 6 districts11 in Western and South-West
Uganda in order to establish VS&LAs as effective financial services for remote and
marginalised communities and minorities who are highly dependent on resources from the
numerous protected areas (National Parks, Forest Reserves etc.) in the region. In all those
programmes we apply the lessons learnt from previous initiatives and a package of best
practices as compiled in the aforementioned VSLA Manual.

This consolidated model includes a more rigorous approach to establishing local capacities
for self-expansion and auto-replication, thus responding to the challenges described in
chapter 1 above (for a more detailed discussion of risks and critical assumption see chapter
4).

Through the CARE, the CSOs receive the financial resources to employ and manage a minimum of one
supervisor/trainer of trainers per five to ten trainers, and to provide an appropriate remuneration for the
trainers. VS&LA trainers are selected and appraised by their respective communities as they undergo a
rigorous training and follow-up programme implemented by local CSOs.

In turn the trainers are held accountable by their clients, the supervisors and CARE advisors for the
application of the set of best practices under the consolidated VS&LA model. The most recent experiences
with this rigorous approach shows that well supported VSLA trainers can lead 8-15 VS&LAs to a first
action audit within not more than 12 months.

Currently, five implementing CSO partners of CARE’s different programmes employ 34
trainers and 6 supervisors, with each trainer reaching 10-15 VSLAs. Thus, together with the
pilot in West Nile initiated jointly by FSDU, CREAM and CARE, the VS&LA model as
currently promoted by CARE and FSDU has reached approximately 11,000 members of
VS&LA country wide, over 65% of them women within about 20 months. The following table
provides a rough baseline of the total number VSLAs formed with support CARE and FSDU
since 1998 as well as and an estimated percentage of the VSLAs that comply with the
consolidated model.12




8
  IRC (lead), AVSI, CRS, SCiU and CARE
9
  No complete data are available for re-grouping rate but some evidence indicates that at least 70% of the
VSLAs re-group within less than 2 months after the action audit.
10
   Especially women groups
11
   Kabale, Kanungu, Rukungiri, Bushenyi, Kasese, Gulu. Partners include Farmers Associations, CSOs
representing minority groups, Adult Literacy CSOs, District Networks, Youth and Women Organisations as
well as Faith Based Organisations.
12
   Estimate based on CARE and FSDU records from different VSL initiatives;.


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NSM-VSL                                              Proposal                                  CARE Uganda
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Organisation           Region           Period       Total           Total VSLA       % VSLAs following
/ Project                                            VSLAs            members         consolidated model
CARE-                  West Nile        1998 –        >1400           >36,000                10%
JENGA                                   2003
CARE       –           Gulu,            2000 –         > 100           Approx.                ???
REIN                   Kitgum           2002                            2,350
CRD                    Western,         2003 –          169             4,485                > 60%
                       Northern         2005
                       Uganda           (June)
FSDU/                  West Nile        Apr04 –         >140            2,850                 80%
CREAM-Pilot                             Mar06                          (Mar05)
CARE other South                        Since           >130           Approx.                80%
projects    West,                       2004                            2900
            Western,
            Northern

CARE International in Uganda also has significant experience with the development and
implementation of CSO capacity building programmes and/or sub-granting mechanisms.
The following table gives a summary of some of its current programmes.

Programme           Donor           Sector of intervention               Total # of CSO     Accumulated
                                                                        partners / sub-      sub-grant
                                                                        grant recipients   portfolio as of
                                                                           (Dec 2005)      Dec 2005 (USD)
REPA                DANIDA          Natural resource Management                  23           235,000

CORE                USAID           OVCs / AB-Y                                  43          4,500,000

INPACT              DFID-CSUP       CBO capacity building / advocacy             10           105,000

HACI                Different       OVCs affected by HIV/AIDS                > 60             350,000


With its well established and tested sub-granting policy and its experience with CSO
capacity building approaches, CARE International in Uganda is well versed to ensure
effective technical support, monitoring and oversight of implementing organisations under
the proposed programme. For more detail about the proposed capacity building strategy
refer to chapter 7.

3 Objectives
3.1 Goal
This proposed initiative is designed under CARE’s strategic direction to promote the
economic rights of poor and marginalised people through piloting and sharing lessons
learnt from innovative economic development initiatives, and advocating for effective
policies and practices.

More specifically, it responds to CARE’s aspiration to lead the establishment of professional
services that will ensure the:

     Provision of financial intermediation services to 200,00013 poor and marginalised
                people in Uganda through VS&L mechanisms by Dec 2009.


13
     Basis for target see section 3.4


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3.2 Intermediate Results
In order to achieve this goal, CARE proposes this initiative, which will produce two critical
results within our overall strategy:

                                INTERMEDIATE RESULT 1
     Establishment of a VSLA Steering Committee for the promotion, expansion and
      quality control of agreed and proven best practices in VS&L by August 2006.

                             INTERMEDIATE RESULT 2
   Establishment of a Central Support Facility providing technical assistance and
 resources to service providers involved in the implementation of VS&L mechanisms
                       throughout the country by August 2007.


3.3 Outputs
By the end of this initiative (August 2007) the envisaged activities (see chapters 5 and 6)
will have produced the following:

a) tangible outputs:
 Technical assistance provided to up to 15 (Dec06: 8) implementing organisations (IO)14
 300 trainers and 45 training supervisors (Dec06: 160/24) from IOs trained and certified
 Best practices documented and disseminated
 3 national events held for promotion of VSL methodology / model
 Publications and videos produced for the promotion of the VS&LA model
 One series of exchange visits between implementing organisations and other interested
    stakeholders organised per year.
and
b) measurable outcomes:
 3,000 VSLAs (Dec06: 1,600) formed under this initiative have completed action audit
 90% of those VSLAs have re-grouped after the first action audit
 60,000 VSLA members have access to loans through the VSLA
 VSL documentation center established
 Joint MIS established between CSF and Implementing Organisations
 Client based quality monitoring and control mechanism established
 Adaptations of basic VSL model to specific settings / client groups (e.g. IDPs)
 GoU policy frameworks and poverty eradication strategies recognize VS&LA as a key
    mechanism of financial intermediation for the poor.


3.4 Justification
The market for VS&LA as a critical alternative to other forms of financial services than can
reach poor, low-income and often illiterate people, is very large. CARE’s target for a
national outreach strategy of at least 200,000 people15 with lowest incomes using the VSL
model by December 2009 represents almost 20% of the potential market for VS&LAs which
is estimated at about 1.064 million (= total population of 28 million * poverty rate of 38%, /
average household size of 5 persons / expected ratio of 1 adult out of every 2 households
(= 50% of heads of households) interested in VS&LA). Most of these people require
financial transactions that are too small to make them potential customers of MFIs.

14
   5-7 funded through DFID/FSDU, 5 currently supported by CARE, others financed / supported by other
members of the VSL-SC.
15
   CARE is targeting predominantly of rural women but will also include unemployed youth, people affected
by HIV/AIDS, peri-urban (slum) populations and IDPs.


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In the recent past, development agencies have approached CARE and FSDU, and
expressed interest in supporting the expansion and promotion of a consolidated VS&LA
model in different parts of the country. Therefore, there can be no doubt that for the
foreseeable future this model will attract wide support from different sources provided the
model can be promoted consistently and with an effective quality control mechanism.

There is reason to believe that the challenges mentioned in chapter 1 can be addressed, as
FSDU’s improvements to the West Nile programme and CARE’s experiences in Western
Uganda show (see chapter 4 below for a more detailed discussion of risks and critical
assumptions). The proposed Central Support Facility (CSF) hosted by CARE will provided
necessary technical expertise and effective oversight as already demonstrated by a similar
unit that provided TA to the CRD consortium and currently provides technical assistance to
CARE’s implementing partners in Western and Northern Uganda.

CARE already supports a number of relevant initiatives through it’s economic empowerment
programmes that include VSLA as one financial intermediation mechanism and therefore
provides an ideal platform for a creation of a VSLA Steering Committee that would bring
together the leaders in VS&LA in Uganda. With its qualified staff, CARE is also well
prepared provide technical assistance to other interested parties including donors, NGOs
and GoU agencies. Beyond the technical capacity and expertise (see also Section 2 above)
CARE is also very experienced in establishing efficient monitoring and reporting
mechanisms. The proposed initiative will use the MIS system developed and tested in many
VSL initiatives including the pilot in West Nile and other CARE VSL projects worldwide16.

Equally important is CARE’s national and global commitment to promote and further
develop the VS&L model. In Uganda, CARE will use the capacity of the proposed CSF not
only to mobilise support to its current programmes and partners but also to establish itself
as a leader in pro-poor economic empowerment strategies in Uganda. Therefore, under this
proposed intervention CARE will specifically seek to adapt the basic VS&L model to the
conditions of specific sections of the populations, such as IDPs, urban youth or poor
households affected by HIV/AIDS. Through its world-wide network, CARE will provide
substantial experience and expertise to this initiative with regards to VS&L best practice,
quantitative and qualitative monitoring tools, access to international fora for the promotion
of pro-poor rural financial intermediation mechanisms and new innovative models for the
application of VS&L mechanisms in specific settings.17

4 Critical Assumptions / Risks
VS&LAs as currently observed in Uganda are still too diverse in the way they operate and
are managed, and therefore their identity (e.g. usefulness, value added) is not easily
recognisable for potential new clients/members. Defects like high portfolio at risk/arrears,
postponement of the action audit beyond 12 months or bad record keeping undermine the
effectiveness of the group and usually lead to the dissolution of the VSLA before maturity or
low re-grouping rates of VSLAs that carried out the first action audit.

The report of the mid-term review of the joint FSDU/CREAM/CARE VS&LA pilot in West-
Nile identifies a number of key assumptions and risks to be addressed for any programme
promoting VS&LA to be successful and efficient both with regards to quality (e.g. maturation
/ graduation of VSLAs) and quantity (e.g. self-replication and expansion):18



16
   See chapter 8 Monitoring and Evaluation;
17
   CARE Uganda will be represented at the first International VSL conference in Nairobi in March 2006.
18
   Hugh Allen (2005): Project review report – Savings & Loans Association Pilot West Nile; FSD/Uganda


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     a) National level harmonisation and coordination of the implementation and country
        wide promotion/expansion of the VS&LA model
     b) Funding to implementing agencies as well as professional technical assistance for
        the expansion of interventions based on the consolidated VS&LA model
     c) MIS system that allow / facilitate VS&LA product quality control at different levels
        (group, implementing organisations, donors)
     d) Professional level of VS&LA trainers and supervisors
     e) Clear definition of VS&LA performance criteria
     f) Link between group-level and programme-level MIS /
     g) Capacity of implementing organisations for timely analysis of MIS data

Efforts are underway by CARE and FSDU to address those issues and improve the trend
already described in chapter 1. In West Nile, FSDU and CREAM deliberately stopped
expansion of the programme to allow the programme to implement the MTR’s
recommendations of improving bookkeeping and reporting, and improving management. A
new FSDU consultant has been aggressively resolving the identified issues, replacing half
of the field agents/trainers, introducing a new bookkeeping system that effectively provides
data for the integrated MIS, and improving the technical, financial and material support for
effective support supervision and monitoring. Under the West Nile pilot over 140 groups
were formed under the consolidated VSLA model in 13 months. Against a target of 4,500
members at the end of the pilot (March 2006), there are 2,579 members as of March 2005.

Similarly, a local partner of CARE in Western Uganda (with 3 trainers and one supervisor)
formed over 50 groups with 1,338 members since November 2004. Over 80% of the VSLAs
in this initiative will complete the action audit before the end of this year and are expected to
regroup for a new cycle19. Similar performance targets are expected from VSLAs newly
formed under the West Nile pilot. In many cases, the groups exceed the expectations with
regards to accumulated savings and interests, thus providing a high incentive to continue
the service.

Based on information from those recent initiatives it is realistic to expect the 300 trainers to
be trained by the CSF to be able to form at least 10 functional VSLAs and lead them to
maturity (i.e. action audit and re-grouping) by August 2007.

In line with those observations, CARE in its current programmes promotes a rigorous
approach and performance management of both the implementing organisation as well as
the VSLAs themselves. Extensive quality control is therefore a central feature of the
proposed initiative. Within a ratio of 5-10 trainers per supervisor20, the implementing
organisations will have sufficient capacity to ensure effective monitoring and quality control.

Apart from high product quality and consistency in service delivery, auto-expansion of
VS&LAs also implies high group density (“critical mass”) in a given geographic area as well
as a certain homogeneity of the membership between the groups. One of the secrets
behind the success of MMD21 is the largely homogeneous membership of the VS&LAs: over
80% illiterate women in remote rural villages. The CARE will therefore promote appropriate
targeting of specific sections of the population as well as a focused geographic coverage.

19
   FURA (Mar-Dec 2005): 53 VSLAs formed, 43 mature (action audit planned within one month), 5 conducted
action audit, 4 regrouped already.
20
   The ratio varies according to implementation structure as required by the density of groups in the operation
zone of the implementing organization, the group training intensity and other context specific parameters.
21
   After the action audit , some members of mature VS&LAs create a new VSLA together with new members
while the other “graduated” members regroup under the existing VSLAs. In most cases a member of the
existing VSLA trains the new VSLA. Some experienced members are also called to other villages to help in the
formation of new VSLAs.


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                                     Draft 3 – Dec 05

This requires a certain level of analytical capacity amongst the implementing organisations
as far as the socio-economic patterns in the target population is concerned.

In concurrence with recommendations in the aforementioned report, CARE will promote the
VS&LA model as a stand-alone financial service that should not be formally linked to
financial institutions (SACCOs, MFIs, Banks). While it is theoretically attractive to embed
VS&LAs into other financial markets, in practice it is complex, and adds new, expensive
services, thus introducing cost layers that will tax VSLA members heavily, and reduce
transparency and trust.

On the other hand, CARE believes and promotes the integration of the VS&LA model into
other socio-economic development strategies. As one example, CARE is very supportive of
approaches that provide VS&L type services to people affected by HIV/AIDS or to the urban
poor. In both cases, the VS&LA model provides a unique opportunity for those sections of
the population for assets protection and high yield on financial assets as it reduces
significantly the vulnerability to shocks.

Furthermore, CARE is interested in fine-tuning its approach whereby the VSLA model is
linked to the training of VSLA members in basic business skills including Selection,
Planning and Management (SPM) of IGAs or the usage of common microfinance products.
Where possible and appropriate, CARE will lobby to make funding available for
implementing organisations to experiment with this approach, and monitor and document
lessens learnt and best practice. CARE therefore envisages integrate its training as much
as possible with other consumer education projects, including a second phase of FSDU’s
consumer education project.

The following Implementation Mechanisms (chapter 5) and Implementation Strategy
(chapter 6) are designed to address those critical assumptions and areas of risk and thus
provide the implementation framework for the proposed initiative.


5 Implementation Mechanisms
In order for CARE, FSDU, DFID and other interested partners to achieve the
aforementioned goal and objectives, we propose to establish two interlinked structures or
mechanisms: the VSL Steering Committee (VSL-SC) and the Central Support Facility
(CSF). Those two bodies will work closely with and support Implementing Organisations
(IOs) that are engaged in training and supervision of VS&LAs country-wide.

5.1 VSL Steering Committee
The VSL Steering Committee (VSL-SC) will bring together development agencies
supporting the expansion of the consolidated VSLA model as promoted by CARE and
FSDU. The members of the VSL-SC will:
    Identify, test and agree on best practices and common models for VSL mechanisms
    Identify and support effective implementation strategies for VSL service providers
    Regularly share and analyse information on outreach and performance of
       implementing agencies
    Jointly inform and educate policy makers, media and the wider public about VSL
       mechanisms and their role in poverty elevation.
    Coordinate VSL initiatives and programmes to avoid duplication and facilitate
       synergy

One important function of the VSL-SC will be to link practice to policy. Through national
events, briefings and publications, as well as active engagement with policy makers in
different fora, the members will establish VS&LA as a key financial intermediation


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                                             Draft 3 – Dec 05

mechanism especially for rural poor but also for particular sections of urban populations,
youth and young adults involved casual work or populations in the IDP camps.

The VSL-SC will be comprised of DFID, FSDU, CARE, one GoU representative, and
representatives of other donor agencies providing funds for VSLA implementation. Initially
the VSL-SC is expected to have not more than five members but as the membership grows,
the members could establish an Executive Team for regular follow-up and especially for the
supervision of the General Support Facility. The VSL-SC may follow the example of the
successful Transformation Steering Committee, which has an inner group of Funding
Members, those who actually provide financial support, and a larger group of tangentially
involved agencies which are welcome to meetings but who do not vote.

5.2 Central Support Facility
The Central Support Facility (CSF) will be comprised of at least three full time staff hired
and hosted by CARE:
 The VSL Coordinator based in Kampala, who will assume the secretariat of the VSL-
   SC, supervise the other staff of the CSF, and as applicable function as senior advisor or
   manager to the co-financing fund set up by the VSL-SC members for VSL service
   providers.

 One VSL Advisor for approximately every five IOs supported by the members of the
  VSL-SC. Starting from January 2006, therefore, the CSF will initially have two VSL
  Advisors serving the 5 IOs of CARE’s VSL related programmes in South, Western and
  Northern Uganda as well as the 5-7 FSDU/DFID supported recipients of VSL sub-
  grants. The VSL Advisors can be based in any CARE field office location that is
  appropriate for the efficient implementation of the aforementioned tasks, including the
  close monitoring and quality control.

 The VSL Data Administrator who will train IO staff in the use of the MIS tools, plan and
  supervise baseline surveys, and compile data received from the IOs at programme level
  for further analysis and decision making by the CSF and the VSL-SC.

The VSL Coordinator, VSL Advisors and VSL Data Administrator constitute a technical unit
within CARE’s economic development sector programme23 that will:
 Provide technical oversight of implementing organisations (IOs) funded by VSL-SC
    members
 Offer advice and training of trainers to IOs according to previously agreed schedules as
    well as on demand basis.
 Apply and further refine the existing VSLA-MIS including qualitative and quantitative
    reporting tools as well as mechanisms for client based monitoring and control
    mechanism for service provision.

Further more, the CSF will serve as
    Information center on VSL mechanisms as promoted by the VSL-SC members
    Central repository for data, research findings and other documentation related to
       VSL in Uganda
    Facilitator of national events and information campaigns by the VSL-SC
    Rapporteur to the VSL-SC members on progress made, problems encountered,
       solutions found, lessons learnt related to VSL.


23
  Currently CARE EcoDev sector staff comprises of one sector manager, three team-leaders (south-west,
north, center), and about 12 technical staff out of which 5 are directly involved in the VSLA promotion). The
CVs of the technical staff currently constituting CARE Uganda’s VSLA technical support unit are attached to
this proposal.


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                                                Draft 3 – Dec 05


5.3 Implementing Organisations (IOs)
The proposed initiative will build on experiences of CARE and FSDU with the technical and
financial support to implementing organisations that are involved in the creation, training
and supervision of VS&LAs in different regions of Uganda.

Within the framework of the proposed initiative implementing organisations (IOs) are
expected to comply with the following criteria:
    Use the consolidated VS&LA model as proposed by CARE and FSDU
    Effective and transparent line management structure with professional supervisors
       and full-time VS&LA trainers, and adequate infrastructure
    Use standardised MIS, reporting and management tools
    Capacity to collect, analyse and document quantitative and qualitative data of
       programme performance for national promotion and advocacy
    Achieve agreed efficiency norms and benchmarks
    Management systems in line with generally accepted accounting principles

IOs will receive intensive technical and if applicable also basic managerial capacity building
by the Central Support Facility for a period of at least 20 months (i.e. 1-2 months start-up
and basic capacity building, support supervision during two standard VS&LA cycles (8-9
months), graduation 1 month)25.

6 Implementation Strategy
It is expected that the VSL-SC will attract other agencies into its membership and thus
additional funding for the promotion of VSL mechanisms in Uganda. Therefore, the CSF’s
initial core business will be the provision of technical assistance especially to implementing
organisations receiving financial support from CARE, FSDU/DFID and eventually other
investors for the promotion of VSL mechanisms in Uganda.

The different complementary interventions carried out by both the VSL-SC (VSL promotion
and policy development), and the CSF (technical assistance, MIS & quality control) can be
grouped under the following three overlapping intervention phases:

6.1 Phase 1: Technical Assistance (Jan-Dec 2006)
In addition to the application of a comprehensive VSL Training of Trainers (ToT)
programme, the CSF (VSL-SC coordinator and VSL advisors) will carry out organisational
assessment of all implementing organisations receiving financial support from CARE,
FSDU/DFID or other VSL-SC members. This will be combined with an Area Mapping
Exercise that also provides critical baseline data about the envisaged target area(s) and
participating population(s).26
Based on those assessments the team will establish strategic and comparative advantages
for the different IOs, and devise specific technical assistance (TA) plans designed to
increase implementation efficiency (e.g. outreach and costs) of each IO.

At the end of this phase at least 8 IOs will have received TA, both formal and informal, by
the CSF. They will deploy about 160 certified VSL trainers with approximately 1600 new
VSLAs having completed their first cycle by December 2006.




25
     For more details on capacity building of IOs refer to chapter 7
26
     For more detail see Annex 4:      Area Mapping


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6.2 Phase 2: Documentation and Promotion (Apr 2006-Jun 2007)
Concurrently and beyond the technical assistance, the CSF team will document the up-to-
date set of best practice in VSL as well as collect, compile and analyse quantitative and
qualitative data from the implementing partners and VSLAs generated through the joint
MIS. On behalf of the VSL-SC members the VSL Coordinator will serve as an information
hub for VSL practitioners in Uganda. Where necessary the CSF mobilises external
expertise (consultants, researchers) especially for a review and fine-tuning of the MIS
system and tools (tentatively April 2006) and the mid-term review (tentatively November
2006) but also during baseline surveys and location specific area mapping exercises with
the IOs.

In same period, the VSL-SC with the facilitation of the VSL Coordinator and the other
members of the CSF team will hold a series of national, regional and local events designed
to widely promote the consolidated VSL model in Uganda. While increasing public
awareness about the VSL model will be a main feature of those events, another aspect will
be the direct targeting of key decision makers and opinion leaders at different levels. In
addition, the VSL-SC members will use different fora at international level to present and
disseminate the Ugandan model of VSL best practice, perhaps a unique effort involving
close donor coordination and high standards for a large number of IOs.

6.3 Phase 3: Consolidation & Expansion (Nov 2006 – Aug 2007)
Based on the experiences with the initial sub-granting and TA mechanism established
through the CSF during phase 1, the VSL-SC members will agree on one year
consolidation and expansion plan (CEP). The CEP will serve as a business model for a
CSF operational beyond August 2007. It is expected that by October 2006, the initial VSL-
SC members (CARE, FSDU and DFID) will have expanded the initial VSL-SC through
attracting new members that subscribes to a common set of principles both
programmatically and operationally27. In the mean time, technical assistance by the CSF
team to implementing partners will be intensified and expanded from the initial 8 to a total of
15 organisations.28

If appropriate and agreed upon by the VSL-SC members, by January 2007 the CSF will
have initiated the transfer of support supervision capacity and thus also certain higher level
data collection and performance monitoring responsibilities to selected IOs. In this case, the
CSF team will work with those IOs or “Centers of Exellence” (CoE) in order for them to
develop their own CEP including funding opportunities and probably concept papers for
potential proposals. CoEs can simply expand their operation area for VSLA formation, or
develop into local VSL training institutions serving other IOs, VSL consultancy agencies,
VSL information centers or other specialised functions that are beneficial to the expansion
of the VSLA model. They are also expected to play a leading role in insuring local
networking between the growing number of VSLAs for local and regional lobbying and
advocacy.

Where appropriate and in line with CARE’s role as a leader in pro-poor financial services in
Uganda, the CSF team will also work with other CARE staff to develop new and innovative
concepts for the introduction and adaptation of the VSL model to specific settings such as
conflict affected, urban or unemployed populations.


27
   Currently the following agencies have expressed interest: Plan International, PRIME West, Austrian
Development Agency, DED, McKnight Foundation
28
   Such an expansion requires additional financial resources including sub-grants to implementing agencies.
While the CSF might have to hire additional VSL advisors, the VSL-SC members are expected to mobilize and
pool financial resources for the support to implementing partners.


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                                            Draft 3 – Dec 05


7 Capacity Building
The capacity building of Implementing Organisations (IOs) will be a central function of the
CSF. CARE proposes a combination of organisational and technical capacity building in
order to ensure continuity of services provided by the IOs beyond the end of the propose
initiative:

7.1 Capacity Assessments
Detailed organizational capacity assessments of every IO will be conducted to establish
capacity building needs (technical, human resources, administrative and accounting
systems) to effectively monitor and manage VS&LAs activities. The capacity building plan
will be dependent on the particular characteristics of each IO and the profile of its client
group.

7.2 Organizational Capacity Building
Organisational capacity building of IOs will include but is not limited to strengthening human
resources, administrative and accounting systems. As such, the central support facility with
the support of members of the steering committee will examine existing systems and make
recommendations for improvement and development of appropriate policies and systems
needed to accommodate VSL activities and the resources provided to IOs29.

7.3 Training of Trainers (TOT)
Staff of IOs, including managers, supervisors and trainers, will be trained collectively and
independently so that they are able to play their respective roles in the implementation of
VSLA activities. After an initial ToT30 in the basics of the VSLA model and the VSLA
Training Manual, trainers will receive regular support supervision visits (every 4-6 weeks) by
the VSL advisors as well as follow-up training in the coaching and monitoring of VSLAs.

Initially, VSL advisors will conduct the ToTs but always in tandem with supervisors and
managers of the IO. After 12 months, the supervisors of the IO are expected to assume the
ToT function with minimal support from the VSL advisors. CARE will facilitate also the
exchange of trainers (and supervisors) between IOs for cross-learning and regional
synergy. In addition, cross-visits will be used to enable trainers and clients from different
IOs interact and share experiences.

7.4 Management/supervision
Supervision will be decentralized with the Central Support Facility responsible for the overall
supervision, coordination and ensuring of product quality. Supervisors from the IOs will be
trained in support supervision skills and provided with key tools to monitor the performance
of trainers. While initially VSL Advisors will train VSL trainers directly, Supervisors and
Managers will receive specific training and support in the implementation the ToT
methodology for further expansion. They will report directly to the designated VLS advisor
in the CSF as they gradually take over responsibilities related to ToT and support
supervision.

The VSL Data Administrator will train IO staff in designing, administering and analyzing
baseline surveys so that they are able to monitor the impact their training has had on their
clients and determine areas of improvement. Trainers, Supervisors and Project Managers
29
   While the CSF will concentrate on the technical capacity building direct to VSLA promotion, IOs will agree
with the funding agencies / VSL-SC members about target managerial capacity building for funds management
/ accountability. This capacity building will be out-sourced to a specialized agency under supervision of the
CSF.
30
   One week ToT: about 10 trainers in one cluster to be trained by one VSL advisor


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                                                 Draft 3 – Dec 05

will be trained in the application of standard MIS tools to ensure tracking of group, trainer
and project performance.

8 Monitoring and Evaluation
While the Monitoring and Evaluation (M&E) Plans will vary from IO to IO depending on the
specific operational context, the CSF will be responsible for ensuring consistent and
efficient data collection and synthesis throughout the whole programme thus involving all
IOs. The CSF is also responsible for primary data analysis and learning (together with the
IOs), where as the VSL-SC will use primary lessons learnt and performance data to monitor
overall programme performance and develop policy recommendations.
The VSL-SC members are interested in qualitative data about best practices and
experiences with the consolidated VSL model, as well as standard quantitative data about
the financial services provided by VSLAs. This information will also help publicise and lend
credibility to the VSLA approach with government policy makers, the media and the general
public.
The different tools and mechanisms used in the programme M&E system can be
summarized under the following categories:

8.1 Progress (Output and Process) Monitoring
At project level IO field staff (trainers and supervisors) will establish work plans based on
which they will prepare monthly qualitative progress reports that include output data as well
as process information on each VSLA and area of operation (by the trainers), on each
trainer (by supervisors). The respective IO managers will compile those reports in one
narrative report accompanying the monthly quantitative data generated by the MIS.

Field visit reports qualitatively commenting on IO performance and progress will be
compiled after each visit to an IO by a VSL advisor for continuous monitoring and reporting
to the VSL-SC. Based on those reports and agreed benchmarks in the work plans of each
IO, the CSF team will compile quarterly progress reports for the VSL-SC. The VSL advisors
will organise regular reviews of the progress monitoring information by VSLA members,
VSLA trainers, management staff of IOs and other key stakeholders.

8.2 Standard MIS system (Outcomes)
Quantitative data about the VSLAs will be collected by the IOs based on an agreed set of
indicators31 and through standard MIS tools included in the consolidated VSL model. The
following table provides an overview of the data flow in the standard MIS Matrix from the
group / VSLA to the programme level.32

                                                                         Who Receives the
          What                         Who Creates                                                       When
                                                                           information
                          Field Officer from VSLA Documents:
                           Attendance Register
                           Social Fund Ledger
 Field Officer /                                                                                       As    soon
                           Share/Savings ledger
 Trainer      Data                                                     MIS/Data Capture Clerk          after visit
                           Fines Ledger
 Collection Form                                                                                       as possible
                           Loan Ledger
                           Cash Book
                           Statement of Association Worth
 Consolidated                                                          Manager, passed back
 Association              MIS/Data Capture Clerk                       in summarised form to           Monthly
 Performance                                                           Field Officers

31
     for possible qualitative and quantitative indicators see Annex 1: Table of potential indicators
32
     from VS&LA Training Guide Version 1.2


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                                          Draft 3 – Dec 05


                                                                Who Receives the
       What                      Who Creates                                                When
                                                                  information
 Analysis


 Overall  VS&LA                                               Director of Programme,
 Project             MIS/Data Capture Clerk/ Manager          Field Staff, external      Monthly
 Performance                                                  audience



The VSL Data Administrator of the CSF will collect, review and compile those data on a
monthly basis in a VSLA database for internal analysis. The CSF team will further
synthesise and summarize the information from the VLA database together with progress
reports on a quarterly basis for further analysis by the VSL-SC.

8.3 Impact Monitoring
This information will be collected and analysed through surveys starting with the area
mapping exercises and the baseline data from the groups as well as socio-economic data
from a sample of members from each group at formation stage as well as after the action
audit / graduation of the VSLA.33 VSL Advisors together with the IO field staff will conduct
group assessments and administer the baseline surveys under the supervision of the VSL
Data Administrator. Both qualitative and quantitative information will be summarized on a
quarterly basis by the VSL-SC coordinator for reporting to DFID, the VSL-SC and others.

Surveys will also be linked to applied research on aspects of social and economic
empowerment of VSLA members and the (potential) wider impact on poverty alleviation.
The CSF team will supervise this applied research carried out by external consultants and
associated researchers based on criteria and indicators of change agreed upon with
participating communities. CARE Uganda will use quantitative and participatory impact-
monitoring methodologies currently promoted within CARE worldwide and commonly know
as “Strategic Impact Dialogues”.34

CARE, as FSDU and others, is very interested in testing the assumption that VS&LAs are
self-replicating and, if constituting a critical mass, self-regulating. Therefore, CARE will
ensure that both the CSF as well as the IOs have sufficient resources and adequate tools to
monitor a representative sample of VS&LAs and their members (approximately 10%) after
their graduation (i.e. completion of the first savings and loans cycle). Post-graduation
surveys will therefore be conducted after 12 and 18 months of project implementation, and
hopefully beyond the life of the proposed initiative.


9 Exit Strategy
As described above, the central critical assumption is that VSLAs established on the
consolidated model are self-sustainable, i.e. do not need further external support (financial,
training, supervision) to continue the service to their members after the first action audit.
Rigorous performance monitoring of the implementing organisations, their staff as well as
the VSLAs created under this initiative, together with appropriate targeting will create the
necessary enabling environment for continuous support to the expansion efforts by IOs as
well as for the self-replication of VSLAs.


33
  see Annex 3: Impact Evaluation
34
  This methodology follows CARE’s principles of a Rights Based Approach (RBA) and is also of high
relevance to CARE UK’s focus on RBA applications within its current PPA with DFID.


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                                          Draft 3 – Dec 05

Another expected outcome of this initiative is to establish a Central Support Facility for VSL
practitioners in Uganda. This independent CSF will have a solid business plan and is
expected to attract external funding for a continuation of its critical TA and
documentation/information services for at least another 2-3 years beyond the end of this
proposed initiative.

It is not expected that the independent CSF will be able to cover all its costs from
organisations requesting its services but as a matter of principle implementing
organisations receiving support from the CSF will have to cover all direct costs for training
and monitoring of VSLAs (estimated at a minimum of USD 50/member of a newly formed
VSLA). Thus, the dependency of CSF on external funding will be limited mainly to
personnel costs as well as costs for VSL promotion, capacity building of IOs, nation wide
quality control and documentation.

Assuming the current level of VSL-SC members’ and others’ interest in the VSL model and
demand for VSL-TA maintains a high level over the next 5-6 years it is expected that
sufficient resources are available to sustain CSF operations. Otherwise, the proposed
initiative will at least leave behind strong capacity amongst the IOs to expand their VSLA
client base and promote the VSL model locally.

10 Budget
The total budget for 20 months of CSF operations is estimated at USD 427,370 / GBP
251,394 (see attached detailed budget) or about USD 7 / VSLA member (client).

CARE is requesting USD 351,012 / GBP 206,478 to cover the basic personnel costs of the
CSF team as well as costs related to research, learning and documentation, and
operations. CARE will contribute equipment and vehicles from its own pool, and share costs
for one VSL advisor as well as some of the basic operational costs (e.g. rent etc.). The total
value of CARE’s contribution is estimated at USD 76,358/ GBP 44,916.

This does not include the financial support provided directly to implementing agencies by
CARE, FSDU/DFID or others members of the VSL-SC for the expansion of VSL
mechanisms in Uganda supported by the proposed initiative. The costs incurred by the
implementing organisations for reaching the anticipated 60,000 VSLA members by August
2007 is estimated at about USD 50/client or a total of USD 3 million / GBP 1.765 million.35

In the event of an expansion of the VSL-SC committee and thus the overall outreach of the
programme through additional implementing organisations, each new VSL-SC committee
member is expected to contribute about USD 170,000 or GBP 100,000 to the CSF budget
to cover shared and additional costs.




35
  This estimate is based on historical costs documented under the CRD programme, the VS&LA pilot in West
Nile, and discussions held with potential implementing partners.


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                                                Draft 3 – Dec 05



Annex 1: Table of potential indicators
Data Source                   Qualitative data                                   Quantitative data
                          (research & surveys)36                              (standard MIS tools)37
VSLA/Group           Group coherence / management                       # of members (by gender, age)
                      (accuracy of records, application of by            cumulative savings value
                      laws/constitution, transparency)                   active loans
                     Group graduation (application of VSL               cumulative loans value
                      standard methodology)                              value loans past due
                     Social promotion (e.g. social solidarity           annualised net profit
                      fund, join social activities …)
                     Membership / client satisfaction with
                      trainers, group leadership, product …
Programme            Classification of participants according           # of members (by gender, age)
(implementing         to poverty levels, social status, gender,          cumulative savings value
                      age …                                              average groups net worth
agencies)            Improvements in social-economic                    average loan size
                      status of particular sections, e.g.:               cumulative loans value
                         o Women’s empowerment                           loan principle repayment
                         o Economic            activities         /      portfolio at risk
                           entrepreneur-ship         /    income         average return on savings
                           diversification                               annualised net profit
                         o Financial growth (e.g. access to
                           other financial services)
                         o Behaviour      changes:       decision
                           makers, governance structures
National –           Consideration within national policy               # of members (by gender, age)
CSF / VSL-            frameworks                                         cumulative savings value
                     Harmonization of VSL model                         average loan size
SC
                     Quality control mechanism                          cumulative loan value
                     Professionalization         of       trained       portfolio at risk
                      personnel                                          average return on savings
                     Adaptation of basic model                          annualised net profit
                                                                         # trainers graduated
                                                                         # supervisors graduated
                                                                         client/group formation costs




36
   Specific indicators especially at group and programme level to be agreed upon with participants (VSL
members), in particular with specific sections of the communities (e.g. women, youth …)
37
   From the current VSL handbook (VSL Associates, 2005; www.vsla.net )


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                                               Draft 3 – Dec 05



Annex 2: Efficiency Norms and Benchmarks

                                                                                 36
                       Efficiency Measures                        18 months               5 years
                                                                               months
    Clients per Field Officer                                            250       400   750-1,000
    Return on total savings                                             40%       50%         60%
    Clients graduated per year/Field Officer                             250       500   750-1,000
    Cost/Client                                                     $100-125    $50-60      $30-40
    Field Staff to Total Staff                                          50%       60%         75%
    Length of supervision period                                          12        12          12
    Drop out rate (Associations ceasing to operate)                      2%        4%          6%


Note: the degree to which efficiency is achieved depends on a number of factors:
     Frequency of meetings
     Whether or not groups are clustered for meetings
     Use of existing village trainers/ agents (usually selected/paid by the groups)

Using existing trainers/agents and clustering enables caseload efficiencies to rise to above
750 clients per Field Officer. Further increases are possible if meetings are less frequent
than weekly. It is, however, important not to exceed about 800 clients per Field
Officer/Trainer if association quality is to be assured.




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                                                Draft 3 – Dec 05



Annex 3:                   Impact Evaluation

Impact evaluation should be considered at three levels:
          Association
          Household
          Individual
Impact measurement tools are built into routine project operations and focus on the
measurement of financial change at the level of the Association.    Portfolio performance
data can be generated amongst Associations with whom projects maintain a training and
supervision relationship, because otherwise additional staff will be needed to follow up
graduated Associations. Using this approach the data gathering function can be carried out
as part of routine visits by field staff to active Associations and is thus a Field Staff
responsibility
Impact goes beyond the financial benefits derived from savings and the yield on those
savings. It must also capture benefits derived from loans. In order to capture the totality of
benefits from Association membership and to be sure that this translates into improved
livelihood security it will be also be necessary to conduct surveys of individual households
and individuals clustered in focus groups, with the focus groups being comprised of one
complete Association, chosen randomly. These can be selected by capturing every 10th
Association inducted into the programme during the first year, with a reduced rate of
induction thereafter, leading to coverage of approximately 4-5% of the total client group
over time. Follow-up should then be done annually at approximately the same time of year
as the earlier interviews.
Table 20 on the following page is an evaluation framework. It looks at households and at
individuals. At the household level there is a focus on income, assets, welfare and the
profitable allocation of labour to new economic activities. At the level of the individual, by
contrast, the issues are more in the social domain, taking into consideration improved
control of decision-making and resources by women and improved social capital amongst
all participants. Increased productivity of labour is also considered.
The following table summarises the types of research that VS&L programmes should
conduct; who will do it; who will be interviewed; when the interviews will take place and
what type of interviewing technique will be used.

Research Matrix

           What                   Who                  Sample              When                   How
    Area Survey            Field Officers and                         Start of project   Rolling baseline using
                                                          n/a
                           Project Manager                                               household interviews
    Impact Survey          Project Manager        5% sample of        Mid term and       Focus groups and
                                                  VS&LAs              end of project     individual household
                                                                                         interviews
    Satisfaction survey    Evaluation team        Random stratified   Mid term and       Focus groups
                                                  sample              end of project
    Consolidated           Field Officers and     All Associations    Throughout         Monthly data capture
    Association            Data Capture                               project            and analysis
    performance analysis   Clerk




                                                   Page 23
NSM-VSL                                    Proposal                                       CARE Uganda
                                        Draft 3 – Dec 05

The impact assessment approach is summarized in the chart below.

Impact Assessment Matrix
   Area of
   Inquiry               Hypotheses                   Method of Measurement              Assumptions

 Household    Participation in VS&L programme          Impact survey consists of       the economic
              leads to:                                 determining the degree to        environment is
               Increased household assets: goods       which household and              conducive to
                and transport, savings                  individual problems have         profitable micro-
               Increased household welfare:            been addressed by the            investment by
                housing, education, food, health        VS&L programme                   participants
               Increased allocation of household      Method is small (10-15          the social
                labour to new income-generating         member) focus group              environment is
                activities                              discussions with sample of       conducive to the
                                                        Associations and/or              formation and
                                                        individual household             operation of
 Individual            Increased control of            interviews if budgets permit     Associations
                resources by women, including          Sampling 10% of first           Female
                enterprise resources, business and
                                                        year’s intake. 5% life-of-       participation is not
                loan decision making and
                                                        project intake.                  restricted
                household decision making
                                                       Control groups not              That literacy and
               Increased self esteem and social
                                                        required – use of subjective     numeracy levels
                capital
                                                        comparison approach in           are adequate to
               No negative impacts on children’s       which members compare            permit the use of
                labour                                  themselves to non-member         this methodology
               Increased productivity of labour        families
                without negative consequences



Both the household and individual focus group discussions will take place at the same time
with the same people. Both are a mixture of quantitative and qualitative data. This is a
challenge for coding open-ended responses but is worth it.




                                            Page 24
NSM-VSL                                    Proposal                            CARE Uganda
                                        Draft 3 – Dec 05



Annex 4:               Area Mapping
The purpose of area mapping is, primarily, to develop data on the following factors:

   Population density
   Level of economic activity
   Infrastructure, particularly accessibility to markets

Population density is a crude measure of market size, because a high population density
means that many people can be reached at low cost and is also an indicator of market
activity and higher levels of disposable income. This information should be available from
secondary sources. If not from Government, then from other NGOs working in the area.

Levels of economic activity and household livelihood security. VS&L cannot work in
a non-cash economy; nor does not work well in places where the levels of poverty are
driving people towards dependency on emergency services. The higher the level of
economic activity, the higher the level of disposable income and savings capacity and thus
the level of household livelihood security. The evidence of economic activity is shown by:
       Local Economic Environment
       Frequency and size of local markets
       Widespread investment in cash crops
       Density of permanent small shops
   Household Livelihood security
     High density of primary schools and high enrolment rate
     Relatively good quality housing
     Provision of public, NGO and private health services and high general levels of
       health
     High asset levels of the family. These can comprise:
        Agricultural tools and buildings
        Savings in cash, stored grain and livestock
        Consumer durables such as furniture
        Productive non-farm fixed assets such as sewing machines, freezers, bicycles
          etc.
     Social capital
        Presence of active community groups, including NGOs and ROSCAs and high
          frequency of membership by household

Infrastructure.
   Density of good quality roads linking population centres to markets.
   Frequency of public transport facilities linking communities to markets and frequency of
    use by traders buying agricultural produce.

Existing Sources of Financial Services

There is no need to conduct this exercise in an over-complicated way: often common
sense is a good guide to the potential viability of starting VS&L in a given environment




                                           Page 25
Area Mapping Framework

                      Category of
     Item                Data                  Specific Information                     Type of Data                   Means of collection                   Who
                       Required
 Population           Density    of         Government census data                  Quantitative                     Collection of secondary         Project Manager
 Density              population by         NGO studies                                                             data through direct contact
                      Zone                  University
                      Local            Frequency and size of local markets          Quantitative                    Observation and mapping          Field Officer
                      economic         Prevalence of cash crops                     Qualitative                     Observation and mapping          Field Officer
                      environment      Density of permanent small shops             Qualitative                     Observation and mapping          Field Officer
                                       Prevalence of barter                         Qualitative                     Observation                      Field Officer
                                       Inflation rate                               Quantitative                    Key informant discussion         Project Manager

Levels       of       Household            Target group economic activities         Qualitative/descriptive          Project data, focus group       Field Officer
Economic              Livelihood                                                                                     discussions research
Activity   and        Security             Density of primary schools               Quantitative                     Government       Education      Field Officer
Household                                                                                                            Statistics                         Field Officer
Livelihood                               Local Primary school enrolment             Quantitative (%)                 Focus group discussion          Field Officer
Security                               rate                                          Qualitative                      Observation and mapping         Field Officer
                                       Housing quality                              Qualitative                      Focus Group
                                       Health service provision                     Qualitative                      Focus group discussion          Field Officer
                                       General quality of health                                                    questionnaire                      Field Officer
                                                                                     Quantitative                     Focus group discussion
                                           Household Assets                         Qualitative                      Focus group discussion
                                           Social capital
Infrastructure        Road quality         Road provision in target zone            Quantitative                    Mapping                        Project Manager
                      and provision        Road quality by type                     Qualitative                     Observation                      Field Officer
                      plus use             Public transport facilities              Qualitative/Quantitative        Focus group discussion           Field Officer
                                           Frequency of visits by traders to        Qualitative/Quantitative        Focus group discussion           Field Officer
                                          markets
Inventory        of   Financial             NGO credit programmes                   Qualitative/descriptive         Secondary data                 Project manager
Services              Services              MFIs and banks                                                           Visits to institutions         Project manager
                                            Traditional systems of savings and                                       Primary data, secondary        Project Manager and
                                          credit                                                                            data                       Field Officers
VSL mechanism   CARE Uganda                    Proposal
                              DRAFT 3 Dec 05




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