Saving groups: VICOBAs and MUSOs, features and effects

Marco Pasini

Expert in rural microfinance

The most recent trends in the microfinance sector stress financial inclusion as one of its priorities, because it fosters people’s economic and social empowerment. Several initiatives have been implemented in this regard, among which the creation and dissemination of a worldwide database on financial inclusion (FINDEX) that can represent a benchmark for both governments and private stakeholders of the microfinance sector.

It is important to stress that although financial inclusion is a positive process per se, it can have very various effects on people’s life, depending on the way it is implemented. Savings groups, in their great variety, are an extremely powerful and broadly diffused instrument, to financially include the most vulnerable people, and therefore a relevant entry point to the analysis of the phenomenon of financial inclusion.

The driver of our discussion is the identification of the effects of financial inclusion, when occurring through savings groups. We can distinguish three main effects: the redistribution of incomes, the accumulation of resources (savings) and the improvement of social capital. These outcomes vary greatly according to the methodology used within the saving group, and we will illustrate this with two examples.

Among the plethora of savings groups, which are all different from each other- tontines, VSLAs, informal groups, etc. – we choose two examples: Village Community Banks, known as VICOBAs, typical of Tanzania, and Mutuelles de Solidarité, known as MUSOs, in Haiti. The two examples do not have anything specific in common, except that they are a national, original evolution of savings group, not necessarily a model imported by an external organization.

VICOBAs can be associated to what is usually described as ASCA, Accumulating Savings and Credit Associations. People gather in groups, meet regularly (weekly or monthly), and at each meeting buy some shares by depositing their money. People who need a loan can apply for it, which they will reimburse in 3 to 6 months, with a certain interest rate (generally around 5% monthly). Usually, all members take at least one loan over the year, and is some VICOBAs this is actually an obligation. The reason is that at the end of the year all the incomes are redistributed among the VICOBA members: shares are given back to the saver according to her/his deposits, and interest is divided as well among members, sometimes in equal shares, sometimes on the basis of the shares owned by the member or on the amount of interest paid back by her or him. Just a small portion of this capital is kept within the VICOBA to facilitate the beginning of activity in the following year and provide for running costs. What does it mean for the members of the group? Well, accumulating resources is what brings people into VICOBAs. Within this structure, the interest rate is not a real cost for the members, but rather an additional way to accumulate the capital that will be redistributed among them at the end of the year. From this point of view, even the 10% monthly that some of them charge is acceptable to them. However, this does not mean that it does not generate any problem. On the opposite, it happens often that someone takes a loan without any specific reason or need for it, but because it’s available, or even mandatory, and without any plan on how to pay once the resources are spent, often immediately.

All members are equally treated in the VICOBA. They differ by the number of shares they take weekly (but the price is the same) and the amount of loan they take, up to the internal limit set for it, and within the rule that the loan does not exceed three times the owned shares. There is a redistribution effect among members in the VICOBAs which divide the interest gained over the year in equal shares among all the members, notwithstanding the amount of shares of loans that each person has

A variation, that can seem minor to an outside observer, can in fact completely reverse the perspective of the group members. Haitian MUSOs use a model that is pretty similar to the standardized VSLA (Village Savings and Loan Groups) procedures that several big international NGOs, as CARE, CRS of Plan, propose. People meet every week and save in three boxes: a green box, where regular savings are collected, and which is the running capital for loans, a red box, which is an emergency capital for members in need, and a blue box that serves for transactions outside the group, like loans it takes, or social investments it may decide to make. But the key difference is that at the end of the year, the boxes are not opened and the dividends are not distributed among the members. The capital stays in the MUSO and grows over the years. This changes the meaning of the transactions people make within the group. Members accumulate savings through their shares, but instead, they create a capital for all members to get proper loan services, in a context where they do not have access to formal financial services. Interest rate is a true cost for each member, but, since there is no cost of money for the MUSO, it can be kept at lower rates than market level.

The capacity of the group to work together on a long-term perspective (more than a year) modifies completely the instrument from a form of savings to a tool for investment. There are no good or bad models: it’s matter of choice, of need, and competence as well. Small changes in the way people are financially included can significantly modify what this inclusion means for the people.

And what about social capital? In these forms of savings group, it is a by-product of regular meeting and sharing resources among peers. The emergency fund (mandatory in MUSOs, optional in VICOBAs) reinforces internal solidarity. The composition of groups drives the type of social cohesion: they can be tight groups of professionals (traders, tailors, farmers, etc.) or neighbors, or looser gathering of people living in the surroundings. The more members share needs and values, the more likely they are to have positive and responsible financial behaviors within the group, and the wider the effect will be on the community (through social investments for the benefit of the community for instance). The same goes for groups that were built around the need to cooperate, and where financial services have been added as additional features, although the process works in a different way.


  1. Walter de Oliveira

    Hi Marco
    I find very interesting the MUSO experience in Haiti. The members can share needs and values thus promoting social cohesion
    You said that the interest rate can be kept at lower rates than market level. How low can it be (50% of commercial bank interests rate)?

  2. Marco Pasini

    Hi Walter,
    nice to get in touch with you again. Actually, the level of interest rate that a MUSO can charge depends of how the MUSO is organised, and how big it is. When a MUSO relies only on the money collected by members, it can usually charge lower interest rates, but loan amounts are limited. Indeed, several MUSOs directly take loans that they redistribute to their members, in order to be able to provide bigger -more interesting- loans. In that case, the final interest rate paid by the MUSO member will cover also the interest that the MUSO itself will pay to its lender. Therefore, it’s not easy to provide a general rule on how much lower interest rates charged by MUSOs can be compared to market level. Anyway, beware of a key aspect: the “market level” MUSOs should be compared to is not the one of commercial banks, which are totally inaccessible for a standard MUSO member, but the one of microfinance institutions and saving and loan cooperatives (caisses populaires), which are the real alternative, or further step in the financial inclusion process.
    Don’t hesitate to contact us if you need more details of that.


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