Microfinance in East Africa WWF Care LTS

8/7/2019 Microfinance in East Africa WWF Care LTS

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SUMMARY REPORT

Microfinance and environmentalsustainability at selected sites in Tanzania

and Kenya

Robert Wild, Altemius Millinga and James Robinson

August 2008


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Summary report - Microfinance and environment in Tanzania and Kenya, Wild, Millinga, Robinson

ContentsACKNOWLEDGEMENTS....................................................................................................................................... 3

ACRONYMS............................................................................................................................................................... 4

1. EXECUTIVE SUMMARY............................................................................................................................... 1

1.1 MAIN FINDINGS ........................................................................................................................................... 1

1.2 LESSONS LEARNT......................................................................................................................................... 4

1.3 MAIN RECOMMENDATIONS ......................................................................................................................... 4

2. BACKGROUND TO THE REVIEW.............................................................................................................. 5

3. SITE DESCRIPTIONS..................................................................................................................................... 7

3.1 JOZANI-CHWAKA BAY NATIONAL PARK,ZANZIBAR,TANZANIA .............................................................. 10

3.2 RUVU SOUTH FOREST RESERVE,TANZANIA.............................................................................................. 10

3.3 GREAT RUAHA RIVER CATCHMENT,TANZANIA ........................................................................................ 10

3.4 RUFIJI,MAFIA AND KILWA SEASCAPE,TANZANIA .................................................................................... 11

3.5 KAYAS KINONDO,MUHAKA AND GOGONI,KENYA................................................................................... 11

3.6 LAKE BOGORIA NATIONAL RESERVE,KENYA........................................................................................... 12

4. MICROFINANCE MODELS......................................................................................................................... 13

5. DISCUSSION................................................................................................................................................... 17

5.1 ENVIRONMENTAL SUSTAINABILITY ........................................................................................................... 17

5.2 SOCIAL ACCEPTABILITY............................................................................................................................. 25

5.3 FINANCIAL VIABILITY ................................................................................................................................ 26

5.4 OTHER CONSIDERATIONS........................................................................................................................... 32

6. CONCLUSIONS AND RECOMMENDATIONS......................................................................................... 34

7. REFERENCES ................................................................................................................................................ 34

8. BIBLIOGRAPHY............................................................................................................................................ 36


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Acknowledgements

We would like to thank the numerous people that contributed to this report. First of all the many, manymembers of microfinance groups that welcomed us, put up with our questions and helped us understandtheir individual and group situations. To the many dedicated community leaders, apex institution, projectand park staff at the six sites that helped us plan and execute the study, often translating for us whenneeded and patiently clarifying issues.

Many thanks to the staff of CARE, WWF and TFCG, DCCFF who were very helpful in many ways, indiscussing issues and providing their perspectives on the matters at hand. The study was also a time formeeting many old friends and making new ones.

Sincere thanks also go to the supporting organisations that provided resources, particularly WWF inTanzania and Eastern Africa Regional Programme Office (EARPO), LTS International, CAREInternational and the Tanzania Forest Conservation Group. In mentioning a single name, it must beDavid Hoyle of WWF-UK for his untiring support for the review.

This report is the product of a joint review exercise by LTS International, Care and WWF; the report hasbeen produced by LTS International, independent consultants, and is designed as a lessons learningexercise for adaptive management purposes.

The group is like my family now, we help each other overcome the problems that we all face

Juma Musa Juma, Unguja Ukuu, Zanzibar, Tanzania.

Cover Photo: Group member of Mwanzo Migumu (Its hard at first) Group, Ukguju Ukuu Sheiha (village), JozaniForest. Gold is important part of Zanzibar culture, a form of saving, and was given as an indicator of the success ofthe microfinance schemes. Photo R. Wild.


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Acronyms

ASCA Accumulating Savings and Credit Association

COCOBA Community Conservation Bank (VSLA Variant)CPR Community Property ResourcesDCCFF Department of Commercial Crops, Fruits and Forestry, ZanzibarEARPO East Africa Regional Programme Office - WWFEC European CommunityEIA Environmental Impact AssessmentFGD Focus Group DiscussionFSA Financial Services AssociationGRRC Great Ruaha River CatchmentIMP Integrated Management PlanJCBCP Jozani-Chwaka Bay Conservation Project, Zanzibar

JECA Jozani Environmental Conservation AssociationJOCDO Jozani Credit Development OrganisationKDA K-REP Development AgencyLBNR Lake Bogoria National ReserveMIMP Mafia Island Marine ParkMF MicrofinanceMFI Microfinance InstitutionMMD Mata Masu Dubara (Women on the move)NGO Non-Governmental OrganisationNMK National Museums of KenyaPA Protected Area

PRA Participatory Rural AppraisalROSCA Rotating Savings and Credit AssociationsRSFR Ruvu South Forest ReserveRUCDO Ruvu Credit Development OrganisationRUMAKI Rufiji-Mafia-Kilwa Seascape Project (WWF)SACCOS Savings and Credit Cooperative SocietiesVICOBA Village Community Bank (VSLA Variant)VSL Village Saving and Loan ModelVSLA Village Saving and Loan Association


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1. Executive Summary

Since the mid 1980s, biodiversity conservation projects in protected areas have aimed to supportsustainable economic development for adjacent communities. While experience in achieving this hasbeen mixed, a review of conservation and development held at the World Parks Congress in 2003indicated that the basic models are sound but implementation needs to be improved. This reviewexplores the role of microfinance schemes as an additional, and possibly key, tool in efforts to bothimprove the livelihoods of rural communities living in biodiverse environments, while at the same time toimprove the protection, management and sustainable use of those environments.

The review was carried out of microfinance programmes that aimed to support environmentalconservation projects at six locations in Tanzania and Kenya. Microfinance as a tool for conservation isbeing used in other conservation contexts in these countries. The work was a result of collaborationbetween WWF, LTS International, CARE Tanzania and the Tanzania Forest Conservation Group. OnZanzibar the management authority the Department of Commercial Crops, Fruits and Forestry (DCCFF)supported the project. LTS took a lead in the organisation and execution of the review, WWF-UKprovided the main funding, and other institutions played an active role in planning, site studies, fieldworkand providing transport as well as technical and field staff support.

The review assessed microfinance objectives against three main criteria:

a) Financial viability: This was assessed both in the long term and short term, including thestrengths and weaknesses of the different microfinance models.

b) Environmental sustainability: Assessed particularly with reference to the biodiversity orenvironmental objectives of the projects that have promoted these schemes.

c) Socio-cultural acceptability: Examining the issues of group and broader natural resourcegovernance, the building of social capital as well as a contribution to poverty alleviation.

The work was carried out over a 6 week period in May and June 2007. The review focused on two of thefour microfinance models implemented at the six sites; the Village Savings and Loan Associations (Allen,2006 & Allen and Staehle, 2007), and Financial Services Association (Jazyeri, A. 2000) models.

The study used key informant interviews, focus group discussion and semi-structured interviews. 271microfinance group members took part in focus group discussion and 109 individual interviews of groupmembers took place. Key informants were also drawn from protected area managers and conservationproject staff.

The details and lessons of the review are contained within this summary report, a financial analysis offour of the programmes in An Appraisal of the financial performance of Four WWF projects in Kenya andTanzania (Millinga, 2007) and A Study of Rural Microfinance and its Links with Encouraging SustainableNatural Resource Use Surrounding Protected Areas in East Africa, a dissertation submitted by Robinson(2007) for the degree of Master of Science. These reports are available for those who wish to accessthem.

1.1 Main findings1. The different models performed very differently across the three main criteria of review.

2. One model, Village Savings and Loans Associations (VSLA), stood out in its performance acrossall three sustainability criteria, financial, social and environmental.

1.1.1 Village Savings and Loans Associations (VSLA)

3. The Village Savings and Loans Associations have produced good results and overall membersare satisfied with the financial services they received and, as a result, have been able to makepositive changes to their lives. In communities that have relatively high poverty levels, theschemes are having some impact (Anyango, et al. 2006, 2007).

4. An often repeated appreciation from many members is the social changes, with the solidarity

groups creating a strongly supportive group framework for personal savings and businessdevelopment.


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5. This social component is extremely important to VSLA members and was cited as moreimportant than the financial gains by several female respondents. Group members often feelthey have improved social status due to their increased wealth and social interactions that groupmembership confers.

6. The VSLA performance on environmental criteria did not reach the same level as did the

financial and social components, but nonetheless was making valuable contributions toenvironmental management.

7. Improved environmental management, via a microfinance scheme, is to a considerable extentmediated via the financial and social benefits that the scheme provides, and these have to befunctioning to achieve improved environmental governance. Thus, the three factors are linked:when individuals, households and solidarity groups are making money and working togetherimproved environmental governance is possible, but not automatic, and households can make awider range of choices. Stated differently - to deliver support to individual or householdbusinesses a microfinance scheme has to function financially. To support individual or collectiveaction over environmental management within the groups or wider society, it has to functionsocially.

8. Microfinance is unlikely, however, to have positive conservation outputs alone in the absence of

a suite of other conservation interventions (see point 24), and preferably supportive policies andgovernance frameworks.

9. Environmental transformation has a complex relationship with livelihood and enterpriseopportunities. However, degraded environments do not provide as many livelihoods optionscompared with those in good condition.

10. The overall ecological, social, economic, governance and political context also affects theoperation of the microfinance schemes.

11. Design improvements can be made to all three key aspects of functioning including financial,social and environmental. Suggestions are made within the report to improve environmentalbenefits. These include:

a. Environmental assessments of individual businesses;

b. Generic environmental screening of typical local enterprises;

c. Training in the environmental sustainability of enterprises;

d. Support to, or the setting up of, local resource use regulations;

e. Micro-insurance or social funds to provide an alternative to resources use for householdemergencies or life-cycle events (e.g. festivals and funerals);

f. Ethical pressure towards environmental sustainability;

g. Enhanced environmental education;

h. Reinforcement of environmental links through a cultural dimension;

i. Support to community level natural resources governance.

12. Financially, the main concerns are a) how to expand scheme membership by forming newgroups, b) reaching the poorer members of the community and c) meeting the increasedfinancial needs of mature groups whose business activities have begin to outgrow the VSLAmodel.

13. The initial start-up and training costs of VSLA are relatively high, as each group takes part in a 6-8 week long training programme. The initial training is, on the one hand, a key reason for thesuccess of VSL Associations, but on the other hand, a reason why new groups do not readilyform, and in some cases dwindle in number.

14. As the VSLAs are based on members savings, not everyone can access loans when they wantto and there is a need to ration funds. Members are normally confident that this problem can beovercome within the group, with everyone being able to access money when needed. This can,

however, make credit providing institutions an attractive option to members of groups who havereached this stage.


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15. In efforts to increase accessibility to the poorer members of the community, projects havemodified the VSLA model by allowing people to make smaller savings on a daily basis.

16. Within the four VSLA sites, the model was being implemented with significant differences whichprovide insights for future recommendations for this model. Several of the projects are, however,relatively young and the full implications of them are not yet developed. The potential for apex

organisations to resolve both the financial and replication challenges is examined. In particular,the limitation of the NGO/project approach is addressed.

17. Generally microfinance in these contexts is showing promise in not only stimulating higher levelsof environmentally sound economic activities at community level, but also providing a muchsounder platform from which to develop a range of alternative income generating activities thanhas hitherto been possible. At Jozani National Park, Zanzibar where the situation is moremature, and there are significant opportunities, this appears to be the case with, for example, thedevelopment of international export of high quality basketry, the establishment of touristrestaurants, and the tourism butterfly farm project in the initial stages.

1.1.2 Financial Services Association (FSA)

18. The Financial Services Associations were reviewed at two sites in Kenya; Kaya Kinondo, Kwale

District and Lake Bogoria, Bogoria and Koibatek Districts.19. The Financial Services Associations at Lake Bogoria are in need of review, adjustment and

increased support, while the FSA at Kaya Kinondo is to some extent holding its own but is notreally delivering effectively on the three criteria. It will need a redesign and an increase inawareness, training and client outreach to become effective.

20. For the FSAs, the quality of the financial services needs to be improved as does the mechanismfor following up defaulters.

21. An initial training of only 3 days solely for the manager and cashier are considered inadequate.

1.1.3 Other considerations

22. Community memories are long when it comes to making losses from failed microfinanceprojects, and there is thus an imperative to provide sufficient inputs to build trust and to ensuresuccessful projects.

23. The length and level of support to microfinance projects is important: they are long-term effortsand premature graduation can leave projects feeling abandoned.

24. To be fully effective as an environmental intervention, microfinance needs to be part of a suite ofrelated activities that operate in concert. Its effectiveness as a stand alone conservation actionis likely to be limited. The other suite of activities will be site specific but may include some ofthe following:

Institutional capacity building (at community, government and civil society levels);

Environmental education;

Common property resource management; Enterprise development;

Judicious resource protection;

Development and conservation education;

Cost and benefit sharing.

.25. There is a tendency for the microfinance component of conservation projects to be, or become,

implemented separately and to lose synergy or even create conflict. It is very important toensure that a microfinance component is well integrated with other development andconservation components, for most effect.

26. Integrated implementation does not mean, however, that conservation linkages always need tobe writ large. In some situations, e.g. Rufiji-Mafia-Kilwa Seascape Project (RUMAKI), a


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deliberate separation of approaches may be an appropriate approach where trust building isneeded.

1.2 Lessons learnt1. The design of the microfinance model is critical to its performance across all three criteria,

financial, social and environmental.2. Design improvements can be made to enhance performance in each area.

3. Where microfinance is established as contribution to environmental governance it should not beimplemented as a stand alone activity, but well integrated into other development andconservation activities.

4. The best performing model reached a limit beyond which it needs further financial intermediation.

5. The use of initial matching loans to stimulate group formation was appreciated by project staffand group members, and were paid back on time, but are not necessary for successful VSLAs.

6. Initial in-depth training is critical and should not be compromised.

7. Factors potentially inhibiting group replication need to be further examined, including initialmatching loans and initial training costs.

8. Like all financial institutions, ongoing and long-term arrangements need to be developed forsupport, motivation and financial regulation.

1.3 Main Recommendations1. Of the models reviewed, the VSLA model performed the best and would appear to be the best

suited to enhancing financial, social and environmental sustainability in many rural andconservation situations.

2. Further design improvements can be considered to improve performance, especially ofenvironmental sustainability, but also financial and social components.

3. To be fully effective the FSA model will need review, adjustment and increased support. This isparticularly true at Bogoria, and the project is putting such measures in hand.

4. The initial training input in establishing microfinance projects is very important and should not becompromised.

5. The role of start up revolving loans for group formation needs further examination.

6. Implementing agencies should aim to put in place long-term support mechanisms formicrofinance activities.

Image 1. Unjuja Ukuu VSL association Jozani Forest Zanzibar. Photo R. Wild


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2. Background to the review

The environmental impact of microfinance has received relatively little study. This comparative studyacross six sites and two countries in East Africa, Tanzania and Kenya, examines issues that have not

been studied across locations before. During the study, 271 microfinance group members took part infocus group discussions and 109 individual interviews of group members took place. A number ofconclusions can be drawn from the study and thus recommendations have been made.

Efforts to support alternative income generating activities have been a common feature of manyconservation projects over the last 15-20 years. The alternative income approach aimed at supportinglivelihood activities that were an alternative to resource extraction from protected areas with theobjective of reducing the pressure on biodiversity and natural resources. Typical alternative incomegenerating activities (IGAs) have included tree planting, ecotourism, beekeeping, vegetable growing andchicken production. These efforts have had mixed results. It is often difficult to substitute one activityfor another. For example the economic value of beekeeping rarely competes with activities such ascharcoal making, and chicken rearing does not substitute for the cultural values of bush meat. Thelivelihood needs of many households are such that these activities have marginally supplemented

incomes but not to the extent that the problem activities can be abandoned. Problems have beenexperienced, such as those people who undertake the alternative are not necessarily the most resourcedependant households. Thus the beneficiaries of these activities are not the same as those harvestingfrom protected areas. Further income from such activities has often been reinvested in otherenvironmentally damaging activities.

Since 1999 a number of projects in Tanzania (Table 1) and Kenya have taken a supplementary approachthrough the provision of microfinance. The rapid growth and popularity of many of these efforts hasindicated that they show promise in this challenging area. The objective of the review was therefore toexamine in more detail the performance of these microfinance schemes in the context of protected areasand other environmental conservation projects. The microfinance component has, therefore, been onepart of a suite of activities in promoting broader sustainable development and conservation, carried outby a diverse group of institutions with different objectives and under different constraints.

Protected Area District Start Date ofMF scheme

Supportinginstitutions

Jozani-Chwaka Bay NationalPark*

Central & SouthernDistricts, Zanzibar 1998

DCCFF/CARE

Misali Island Conservation Area N & S Districts, Pemba 2002 DCCFF/CAREPugu, Kazimsumbwe & Ruvu*Forest Reserves

Kisarawe 1999 CARE/TFCG/WCST

Mafia Island Marina Park* Mafia 2002 WWFRufiji Mafia Kilwa Ramsar site* Rufiji, Kilwa 2006 WWFMahale Mountains National Park Kigoma Rural 2003 TANAPA/FZSUluguru Mountains Forest

Reserves

Morogoro 2005 CARE

Serengeti National Park Loliondo 2004 TANAPA/FZS

DCCFF Zanzibar Department of Commercial Crops, Fruits and Forestry, CARE CARE Internationalin Tanzania, WWF World Wide Fund for Nature, TANAPA Tanzania National Parks, FZS FrankfurtZoological Society. * = Case study site under this review.

Table 1. Protected areas with saving schemes in Tanzania


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The first such microfinance scheme wasintroduced to the Jozani-Chwaka BayConservation Area (later to become a NationalPark) in Zanzibar, as part of the collaborationbetween the Zanzibar Department ofCommercial Crops, Fruit and Forestry

(DCCFF) and CARE International. JozaniForest is one of the few remaining naturalforest areas on Zanzibar and only 35 milesfrom Zanzibar Town, an urban centreapproaching 300,000 people. Urban demandfor charcoal, firewood and building materialsprovides a ready market and the temptation toillegally harvest forest products to meet urgentcash needs (e.g. for treating illness or payingschool fees). The forest has in the past beenused as an alternative bank, providing short-term cash needs.

In 1999, the Jozani-Chwaka Bay ConservationProject with a grant from the Ford Foundationstarted a community savings and loanscheme, based on the Bangladesh GrameenModel. The first year of the programme wasnot very successful with low repayment rates,but after analysing the problems, a model(MMD now known as VSLA) that CARE wassuccessfully using in Niger was adopted andthe scheme was converted to this model in2001-02. In 2003 when the CARE supportedJozani-Chwaka Bay Conservation Projectclosed, 49 Village Savings and Loan Associations were in operation. In 2006, three years after project

closure, that number had almost tripled to 140. By 2006 a similar scheme at Misali Island ConservationArea, Pemba had 80 associations.

The model has also been used elsewhere in Tanzania not in the context of protected areas orenvironmental projects, for example in the districts of Morogoro, Mbarali, Mbeya, Lindi, Mtwara,Simanjiro.

During 2005/06 initial discussions were held between LTS International, CARE International, the WorldWide Fund for Nature (Tz), Frankfurt Zoological Society and Tanzania Forest Conservation Group totake forward a review of these programmes as a joint action with each party contributing in one form orother. In early 2007 WWF-UK expressed and interest in making a substantial financial contribution to thereview, and requested the inclusion of sites in Kenya. A number of options were explored and finally itwas decided to take the review forward in part as a Master of Science Study as part of the University ofEdinburgh course on Environmental Sustainability. Due to logistical and academic reasons the original

nine sites considered were reduced to six, focusing on those supported by WWF, CARE and TFCG.These six sites were;

Tanzania: 1) Jozani-Chwaka Bay National Park, Zanzibar; 2) Ruvu South Forest Reserve, Kisarawe

District; 3) Great Ruaha River Catchment, Iringa Region and 4) Rufiji, Mafia and Kilwa Seascape

Districts.

Kenya: 5) Kaya Kinondo Sacred Forest, Kwale District; 6) Lake Bogoria Catchment, Baringo and

Koibatek Districts.

The purpose of this review was to achieve the following ends: The generation of lessons learnt regarding microfinance as a conservation intervention;

Image 2. Red Colobus Monkey, Jozani Forest,Zanzibar, Tanzania. Photo J. Robinson


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Determine the impact of the microfinance intervention on poverty reduction and conservation;

Make recommendations for the use of microfinance in other conservation and environmentsettings.

Layout of the report

The review report is in three parts. This document is the summary report. Part One This is the summary document that brings together both subsidiary reports and covers

all six sites (Jozani Forest, Zanzibar; Ruvu Forest);

Part Two This is the financial assessment of the four WWF microfinance schemes, 2 inTanzania and 2 in Kenya (Millinga, 2007);

Part Three This is the main detailed environmental assessment of all sites which, wassubmitted to the University of Edinburgh for the degree of MSc (Robinson, 2007).

Review team

The review was hosted by the staff of the different institutions and project staff at each of the locations,as well as the respective headquarters staff. At different sites key staff involved included at Ruvu South

Forest Reserve - Raymond Nyewla (TFCG); at Jozani-Chwaka Bay National Park - Samira Ali and AliMwinyi (DCCFF), Makonda Vizzer (JOCDO) and George Mkoma (CARE); at RUMAKI - Thomas Chale(WWF); at Ruaha - Petro Masolwa, at Bogoria Fabian Musila and Sirma Chepkonga; and at KayaKinondo - Elias Kimaru and Hemed Mwafunjo (WWF) . Meetings were held with HQ staff including JasonRubens (WWF Tz.), John Salehe (WWF EARPO), George Mkoma, Thabit Masoud, Balaram Thapa(CARE Tz.), Charles Meshack (TFCG) and Bakari Asseid (DCCFF).

The review team itself was made up of three members:

Robert Wild was the principle investigator and designer of the study. Robert has 20 years of protectedarea management experience, 12 years of which was in East Africa. Robert was the ConservationAdvisor to the Jozani-Chwaka Bay Conservation Project working for CARE International when the

decision was taken to initiate microfinance. He also took a lead in the design of the Misitu Yetu Projectwhich implemented microfinance at the coastal forests near Dar es Salaam including Ruvu South ForestReserve. He has provided overall guidance and participated in the field work for Jozani and KayaKinondo sites and is the corresponding author [[email protected]].

Altemius Millinga is a Tanzanian microfinance expert and advisor, with over 20 years experience ofmicrofinance in East Africa. He specialises in micro enterprise development, specifically the planningand implementation of microfinance training programmes, and has worked at both community andgovernment level and with numerous international organisations. Altemius provided the specialisedmicrofinance expertise for the four WWF sites of the study.

James Robinson was at the time of the study a student of Environmental Sustainability in theGeosciences Department of the University of Edinburgh, Scotland. James did the bulk of the field workand worked at all six sites over a gruelling six week period.

3. Site Descriptions

Six sites were included in the review (Table 2.) in order of establishment;

Jozani-Chwaka Bay National Park, Unguja Island, Zanzibar, Tanzania.

Ruvu South Forest Reserve, Kisarawe District, Coast Region, Tanzania.

Great Ruaha River Catchment, Njombe, Rujewa & Mbarali Districts, Iringa Region, Tanzania.

Rufiji, Mafia and Kilwa Districts coastal and marine areas (Seascape), Tanzania

Kaya Kinondo Sacred Forest, Kwale District Kenya

Lake Bogoria Catchment, Baringo and Koibatek Districts, Kenya.Microfinance schemes for these sites were established over the period 1999-2005 (Figure 1.)


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Summary report - Microfinance and environment in Tanzania and Kenya, Wild, Millinga, Ro

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Table 2. Summary table

Site EcosystemPopulation

density1

(pple/km)

Implementing

Partners

Apex

organisation

Main MF

model

Jozani-ChwakaBay National Park,

Tz.

Swamp, coral rag forest,mangrove and coastal

habitats111 DCCFF, CARE,

JOCDO, JECAJOCDO VSLA

Ruvu South ForestReserve, Tz. Coastal forest 27 TFCG, RUCDO CARE RUCDO VSLA

Rufiji, Mafia, KilwaSeascape, Tz

Coastal marine 27 MIMP WWF districtauthorities

None VSLA

Great Ruaha RiverCatchment, Tz. Wooded Savannah 34 WWF None VSLA

Kaya Kinondo, Ke. Coastal evergreen forestremnants

54 Kaya Elders, NMK,WWF

Not welllinked

FSA

Lake BogoriaCatchment, Ke.

Saline lake, wetlands, acaciawooded dry savannah 13 WWF (CCB &CCK) None FSA

Table notes:

1. Population Density: For comparison purposes the rural population density in Bangladesh (home of the Grameen model) from district averages. The Kilwa population density misleading as the population density on Mafia and the urban areas average.

2. Other Models: The Grameen model was unsuccessful at this site and converted into VSLA. The bracketed refers to other M

3. Other Models: SACCOS were established inside the Marine Park, but more recently VSLA have been established outside tDistrict


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Figure 1. Timeline for the establishment of the microfinance schemes in the review

98 99 00 01 02 03 04 05 06 07

Kaya Kinondo

Lake Bogoria

Great Ruaha RiverCatchment

Rufiji, Kilwa,Mafia

Jozani

Ruvu South

CARE - Establishing VSLAsunder Misitu Yetu. Project

RUCDO Umbrella Organisation.VSLAs still forming

Grameen introduced butunsuccessful

CARE - Established newVSLAs

JOCDO Continuing to supportgroups and establishment rateincreased.

WWF EstablishesVICOBAs

WWF Facilitated theestablishment of SACCOSinside Mafia Marine Park

WWF Establish COCOBAs.

WWF DirectSupport inestablishing FSAs

Kaya Kinondo FSA established as part ofthe Kaya Kinondo Ecotourism Project

Someinformalsupport


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3.1 Jozani-Chwaka Bay National Park, Zanzibar, TanzaniaZanzibar combines the twin islands of Pemba and Unguja and is a semi-autonomous part of UnitedRepublic of Tanzania.

The VSLAs were initiated as part of the Jozani-Chwaka Bay Conservation Project (JCBCP) on Unguja.

The objective of the JCBCP, which started in 1995, was to conserve the unique biodiversity of the multi-habitat forest reserves within the Jozani-Chwaka Bay Conservation Area (JCBCA), whilst enhancing thelivelihoods of the surrounding communities. CARE initiated the microfinance scheme in 1999 inpartnership with the Department of Commercial Crops, Fruits and Forestry (DCCFF) and the JozaniEnvironmental Conservation Association (JECA), a local NGO whose formation was supported byJCBCP. The Grameen Model was used and transferred directly from a project implemented using thismodel in Dar es Salaam (which is still in operation there). This model, however, did not function verywell in the more rural setting of Zanzibar, and by mid 2000 an effort was undertaken for a completerestructuring of the project using a different microfinance model. The MMD or women on the movemodel from Niger was adopted, and was one of the first times it was used outside Niger.

The savings and loans component was originally designed to be an integrated livelihood component tiedto conservation objectives. During the restructuring it was recommended that JECA did not havesufficient capacity to support the activity and a new local NGO, Jozani Credit Development Organisation(JOCDO), was established. At this point the implementation of the microfinance component becameseparated to some extent from the conservation interventions. It has been reported that the microfinancecomponent was not tied to the conservation objectives (Anyango et al. 2006), this was not in fact thecase. However, the environmental objective was not explicitly stated in the individual VSLA constitutions,but is contained within the overall JOCDO objectives.

CARE trained groups between 2001 and 2002 and stopped actively supporting them in 2002, whenJOCDO took over. This is a self-run apex organisation that was also examined during the study. In 2006a comprehensive financial review was undertaken of the Zanzibar VSLAs and was published by Anyangoet al. (2007). This report provided the financial information for this study site. For the remainder of thestudy the project site will be primarily referred to as Jozani.

3.2 Ruvu South Forest Reserve, TanzaniaThe Ruvu South Forest Reserve is a 35,000 ha mosaic of coastal forest, woodland, thicket, swamp andgrassland in Kibaha and Kisarawe Districts, Coast Region of Tanzania. Approximately 9,800 ha of thereserve can be considered forest, much of this riparian forest. The reserve is 45 km west of Dar esSalaam. The Tanzanian Central Line Railway and Tanzania Zambia railways cuts through the reserveas does the Kazimzumbwi Mzenga road.

The reserve was gazetted as a forest reserve in 1967. In 1998 the Misitu Yetu project, which translatesinto Our Forests project, was established as collaboration between different partners including CAREInternational and the Tanzania Forest Conservation Group (TFCG). For the remainder of the study thesite will be referred to as Ruvu. Ruvu Credit Development Organisation (RUCDO) is an umbrellaorganisation for the VSLA groups, its establishment was facilitated by CARE as they withdrew their

activities from the area in 2003.

3.3 Great Ruaha River Catchment, TanzaniaWWF has been working in the Great Ruaha River Catchment (GRCC) since 2001. Before 2006 therewas a large amount of work done on establishing Water Users Associations (work that still ongoing) andalso facilitating the establishment of the Mpanga/Kipengere and Usanga Game Reserves.

Mpanga/Kipengere Game Reserve Project worked to enhance sustainable management of naturalresources. It has aimed to achieve this through the following activities: facilitating a comprehensivebiodiversity survey of the game reserve, the preparation of its general management plan (GMP), theundertaking of a socio-economic survey within villages adjacent to Mpanga/Kipengere Game Reserve,support to community reforestation initiatives, facilitating and assisting in the establishment andfunctioning of Village Environmental Committees (VECs), providing environmental conservation


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education, and facilitating community sensitisation and awareness creation on naturalresources/environmental conservation. The project is also implementing environmental friendly IncomeGeneration Activities (IGAs) with communities bordering the Mpanga/Kipengere Game Reserve.Conservation friendly IGAs are seen as an alternative to dependence on natural resources extractionfrom within the reserve. The project was jointly implemented by WWF, the Division of Wildlife, the DistrictCouncils of Njombe and Makete, and the local communities living adjacent the Game Reserve.

Starting in 2003 eleven VSLA groups were established in communities surrounding the perimeters ofMpanga/Kipengere Game Reserve in Njombe and Rujewa Districts. Additionally, nine were establishedas part of the general Greater Ruaha GRCC Programme, in Mbarali District. These latter groups werenot connected to a protected area.

In July 2006, the funding for the WWF GRCC project changed from WWF UK to the EC. WWFestablished a basin wide approach concentrating on water use and water issues. Direct support to theMpanga/Kipengere Game Reserve has ceased, and there is no longer budget for a microfinancecomponent. Support to the village savings and loan associations has also ceased.

3.4 Rufiji, Mafia and Kilwa Seascape, TanzaniaMafia Island Marine Park (MIMP) is situated just off the Tanzania mainland coast south-east of Dar esSalaam in Tanzania, about 20 km east of the Rufi ji delta. The park was established in 1995 and is alarge, multiple-use area being operated on the principles of integrated coastal management.

In 2005, a new five year programme was initiated, aimed to facilitate the development of coastallivelihoods through the sustainable management of marine and coastal resources in the three coastalDistricts of Rufiji, Mafia and Kilwa. This was the Rufiji, Mafia and Kilwa Seascape Programme known,and referred to within this report, as RUMAKI.

The programme is implemented by the WWF Tanzania Programme Office, in partnership with theMinistry of Natural Resources and Tourisms (MNRT) Fisheries Division, the National EnvironmentManagement Council (NEMC), the District authorities in Rufiji, Mafia and Kilwa Districts, the Mafia IslandMarine Park, and the coastal communities within the three Districts.

The goal of the RUMAKI Seascape programme is: Improved socio-economic well-being of coastal Rufiji,Mafia and Kilwa communities through sustainable, participatory and equitable utilisation and protection oftheir marine and coastal resources. The implementation of the programme is influenced by the longterm conservation efforts at Mafia Island Marine Park, and the negative perceptions of these efforts bymany residents, especially fishermen in the area.

One aspect of the programme is to support the development of new small scale enterprises throughimproved access to financial services, especially access to credit. Lack of access to credit was widelyidentified by communities during the RUMAKI planning process as one of the main constraints tolivelihood development. Microfinance projects were established in 2006 in both Kilwa and Mafia,facilitated by RUMAKI staff and a microfinance consultant, and these formed the focus of the review. Inthe establishment of the microfinance component, conservation objectives were deliberately not includeddue to the negative perceptions of the Mafia Marine Park and WWFs role in its establishment and

operation.

3.5 Kayas Kinondo, Muhaka and Gogoni, KenyaThe Mijikenda Kaya Forests are 47 sacred groves scattered along the Kenyan Coast. Of significantcultural and spiritual value for the Mijikenda people, they also contain important biodiversity values. Atwenty-year collaboration between local communities, biologists and conservation organisations resultedwith the Kaya forests being inscripted on the World Heritage List in 2008. Kayas Kinondo, Muhaka andGogoni are located in Kwale District south of the city of Mombasa.

In October 2003 a microfinance institution was established with the objective of being accessible to allthe communities of Muhaka and Gogoni Kayas. This institution uses the Financial Services Association(FSA) model. The unit of this FSA based in Kaya Kinondo is often referred to as the Kaya KinondoVillage Bank. The bank is a secondary project of the ecotourism project which has set up a tourist


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visitors centre at Kaya Kinondo. At the outset it aimed to work in partnership with the ecotourism projectthough this has not in fact occurred. The ecotourism project was aimed exclusively at Kaya Kinondorather than the wider area of the FSA and concentrates on the Kinondo neighbouring villages of Chale,Mgwani and Kibarani.

Kaya Kinondo and Kaya Muhaka are protected areas gazetted as national monuments due to their

cultural importance.

Image 3. Kaya Kinondo Financial Services Association. Photo R. Wild

3.6 Lake Bogoria National Reserve, KenyaLake Bogoria is a Rift Valley soda lake located in south Central Kenya in the Rift Valley Province, ofKenya. Famed like other Rift Valley lakes for its populations of Lesser and Greater Flamingos is itprotected within the Lake Bogoria National Reserve which straddles the border of the Baringo andKoibatek Districts, and is jointly managed by the District. The National Reserve was designated in 1974and in 2001 it was listed as a wetland of international importance under the Ramsar Convention. Thereserve is at risk from unsustainable resource exploitation within the Lakes water catchment area.

Between 2000 and 2005 WWF implemented the Lake Community Based Wetlands Project (LCBWP).One of the objectives of the project was to improve the livelihood of the local community throughsustainable natural resources management. To achieve this objective, the project undertook a widerange of activities such as dryland farming, livestock breed improvement, tsetse fly and tick control,community training and support to income generating activities, among others. Microfinance was lateridentified as an important tool.

In January 2003 the Project commissioned K-Rep Development Agency (KDA), to undertake a RapidFinancial Appraisal (RFA). K-Rep Development Agency is a grant funded organisation that aims toundertake research and to develop methodologies for reaching clients who do not have access tofinancial services. The results of the Rapid Financial Appraisal indicated that the communities targetedhad a demand for financial services and it was viable to establish a Financial Services Association (FSA)in the area. As a result, two separate FSAs were established in March 2005, three months before the

end of this particular phase of the Lake Community Based Wetlands Conservation Project.


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Image 4. Lake Bogoria and Flamingos. Photo J. Robinson

4. Microfinance models

The following is a brief description of the microfinance models which formed part of the review. Figure 2.Presents a generalised and simplified hierarchy of financial institutions. Of importance is the distinctionbetween formal, legally recognised and often taxed MFIs (e.g. FSA) and informal, legally unrecognised,unregulated or untaxed MFIs (e.g. VSLA).

Village Savings and Loans Associations.

Found only in Tanzania, Village Savings and Loan Associations (VSLA) are based on the MMDmethodology originally developed by CARE Norway in Niger, and subsequently applied in severalcountries in Sub-Saharan Africa. MMD is derived from Masa Masa Dabaruwhich roughly translates aswomen on the move, and the original model had a strong emphasis on womens empowerment. TheMMD methodology is the basis for the VSLA model and subsequently the Village Community Bank(VICOBA) and Conservation Community Bank (COCOBA) variants used in Tanzania. The methodologywas also refined based on CARE Tanzania experience in the Jozani-Chwaka Bay Conservation Projectin Zanzibar and WWFs experience of promoting Savings and Credit Societies (SACCOS) on MafiaIsland. The basic principles of VSLA are explained below. For more details see Allen (2006) and Allen &Staehle (2008).

VSLAs are informal voluntary groups consisting of 30 individuals, established for the purpose ofmobilizing savings for lending back to group members. The members are normally mixed gender, andthey should reside in the same village. The associations are built on the principle of pooled individualsavings as the foundation for building capital with the motivation to save coming from the groups. Thegroups then finance members income generating activities through loans from the general fund.


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Figure 2. Generalised and simplified hierarchy of financial institutions

The VSLAs elect members to the posts of chairperson, secretary, treasurer, key keepers and cashiers.Each post is subject for re-election after every business activity cycle which runs between 12 and 18months. The groups maintain the following records: a register of minutes, register of accounts,membership register, loan register and attendance register. At the close of the business cycle accountsare audited by the members and shares are refunded and dividends paid from the profit gained throughlending to members. After closing their accounts, the business cycle starts afresh with a new period ofsavings and the purchase of shares.

Meetings for buying shares and eventually distributing loans are held on a weekly or bi-weekly basis asdecided by the members. Members have the option of buying between 1 and 3 shares at a price decidedby the members at the beginning of the cycle. In addition to buying of shares or contributing to the groupfund, members of the banks are required to contribute to smaller educational, health and, in some cases,environmental funds. Members may then apply to take an interest free loan from the aforementionedsocial and environmental funds.

Loans, on which interest is to be paid, are offered to finance an income generating activity. The modelalso requires members to form groups of five which are charged with the responsibility of loan appraisaland guarantee through joint liability. All borrowers are required to pay an insurance against their loan at arate determined by the members which is usually between 5 and 10%. Groups often operate savingsaccounts with a local bank and some group funds are, therefore, kept in a formal bank, although this isnot a requirement of the model.

Groups promote a savings habit or ethic amongst members, train them in financial management andliteracy, as well as establish social funds as a mechanism for micro insurance for health and educationneeds. Some groups, as mentioned, also established environment funds for individual or groupenvironmental projects.

Formal BankUnavailable for lower economic

groups

ASCAAccumulating Savings and Credit

AssociationsBuild on ROSCA principles

effective un rural areas

MFIMicrofinance Institution

Function best in urban situations

VSLVillage savings and loans model

FSAFinancial Services Association

Little access in most projectsites

ROSCARotating Savings and Credit

AssociationsCommonly occur in many rural and

urban areas

Merry-go-roundsUpatu

Review examplesGeneral description

Formalsector

regulatedand taxed

Informalsector

unregulatedand not

taxed


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Image 5. Mzee Juma Musa Juma, Treasurer of VSLA with cash box, Unguja Ukuu Village, Zanzibar,Tanzania. This is the VSLA infrastructure, more elaborate structures are not necessary. Photo R. Wild

The Financial Services Association (FSA) modelFound in Kenya only, The Financial Services Association (FSA) model (Jazayeri, 2000) involves themobilisation of local financial resources in the form of equity capital in order to establish a locally ownedand managed financial institution. The organisational structure of the FSA and its operating principlesallows for the separation of ownership and management. The shareholders appoint board members,while the board appoints a manager and a cashier. The FSAs core activities include a) the provision ofmicro loans with the interest going to its shareholders and b) savings deposits (for safe custody only andnot available for lending). Other potential products and services include money transfer and microinsurance. FSAs use available local knowledge and information about its shareholders, who are at thesame time the sole clients, for loan appraisal and recovery.

The shares sold by the FSA are assumed to be negotiable instruments; they can be sold or transferredwithout the permission of FSA. Although this could be seen as a strength to the FSA model, on the

ground this has proved otherwise, people in rural areas find it difficult to trade the shares, and hence optfor savings with informal institutions such as ROSCAs and formal institutions such as banks or SACCOS.Loans for FSAs come from FSAs capital consisting of the equity raised from the sale of shares andretained earnings. A shareholder is allowed to borrow three to five times her/his share value dependingon the policy of a particular FSA. Borrowing against shares provides an operational constraint becausethe shares are not easily transferable. FSAs use a combination of physical collateral (landed propertyand chattels-bicycles, furniture) and solidarity groups for peer pressure.

Investors in the FSA expect return on their investments on top of being the sole users of the financialservices offered by FSAs. The FSA are required to hold annual audits to determine the net profit and todetermine the percentage of dividend payment and determine the new share price. The new share price,after dividend, is determined by taking 90% of the book value and dividing the capital and retainedearnings by the number of existing shares.

Box 1. A Ready Made VSL at Kaya Muhaka, Kenya


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In Kaya Muhaka, a conservation group of 40 people had been established and met weekly to discussconservation and development activities, as well as to contribute to a Merry Go Round (ROSCA) savinggroup. While only four individuals within the group had personal FSA accounts, the group did hold anaccount with the FSA. The per head weekly ROSCA contribution was relatively small and ten percent ofthe total collected went into the groups FSA account. There was no easy mechanism, however, for thismoney to reach the FSA and the group treasurer had been known to keep up to ten weeks worth ofpayments at a time before making a deposit. The group had not defined the purpose to which groupmonies could be used.

In spite of the groups links to the FSA, the establishment of a ROSCA indicated a need for a lower levelgroup format saving service. Members of the conservation group were, however, unaware of many ofthe FSA services despite having both a group account and also a board member within their group.Group members, particularly those living further away from the FSA office, felt that the savingsprogramme did not adequately stimulate economic activity and savings in support of their livelihoods.

One way to build upon such informal savings groups would be to develop a series of VSL associationsthat connect to and underpin the FSA.

Ideally, the FSA is expected to take a legal form that allows mobilizing and allocating of shares among itssubscribers. Different countries which have promoted the FSA have registered FSAs in different legalforms. In Kenya, for example, they are registered under the Ministry of Social Development and Genderas associations, legal entities that do not require members to be shareholders but just members withentry fees and annual subscription.

Key assumptions of the model

When establishing a FSA the review team recognised that the following assumptions are made for theFSA is to be a success:

Shares or equity with a potential return would be attractive as local financial investments;

That the funds mobilized through the sale of shares will be sufficient to meet credit needs; Human resources are available from within the community to form a management team and the

Board of Directors, and management and board, require only short term training;

That due to local ownership and social ties there would sufficient social capital in the form ofmutual obligations, trust and cooperation among the FSA members will minimize delinquencyand costs;

Borrowers will repay their loans because of peer pressure;

Linkage with other financial institutions is not needed at the initial stage since local money raisedin the form of shares is repeatedly recycled as loans.

Savings and Credit Cooperative Societies (SACCOS)

Savings and Credit Cooperative Societies (SACCOS), found only in Tanzania, are financial servicescooperatives registered under the Tanzanian 2003 Cooperative Act. The Annual General Meeting (AGM)of members is the supreme body. The AGM elects a Board consisting of a Management Committee,Credit Committee and Supervisory Committee. SACCOS have paid staff which range from Managers toClerks depending on the size of the SACCOS. Supervision is the responsibility of the Registrar ofCooperatives who operates through Departments in Local Government Councils (District, City, Town andMunicipal councils). The minimum membership for SACCOS is 10 members but there is no ceiling.Members buy shares and there are to set rules on regular savings and meetings.

The next sections discuss the detailed findings of each model at each site and follows with overallfindings and recommendations.


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Image 6. Olkoshika FSA, Lake Bogoria. Photo R. Wild

5. Discussion

The different models performed very differently across the three main criteria of review. One model, theVillage Savings and Loans Associations (VSLA), stood out in its performance across all threesustainability criteria; that is financial, social and environmental. The VSLA performance on theenvironmental criteria was not as good as for financial and social criteria, but design improvements canbe made and some are recommended. Environmental performance is to quite an extent dependent onthe other two criteria, as well as outside factors. All three factors are, however, linked. The discussion

focuses on environmental sustainability as this is the focus of the review, bringing in the other elementsas appropriate.

All the other three models had limitations and had either been wound up (Grameen Bank model atJozani), were being considered for conversion to VSLA (SACCOS in Mafia) or performing poorly (FSA,Kenya). Of concern was the FSA model at Lake Bogoria which is in need of a review, redesign andincreased support while the FSA model at Kaya Kinondo is to some extent holding its own but is notreally delivering effectively on the three criteria. It will need some redesign and an increase in outreachto become fully effective.

5.1 Environmental sustainabilityIn terms of environmental sustainability, which is the main focus of the study, the VSLA model was theonly one that performed against environmental criteria, and thus the following discussion focuses on thismodel. The analysis of environmental sustainability for this microfinance scheme takes place atindividual, household, association and community levels.


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5.1.1 Individual business level

The VSLA model provides a number of opportunities to improve environmental sustainability of individualbusinesses. The main mechanism used was the setting of prohibitions against the most unsustainableactivities. Two other mechanisms are suggested here that could be used to improve environmentalsustainability but were not used at any of the sites. Environmental sustainability is often not a clear cut

issue and the way that any individual business is operated affects its environmental impact and hencesustainability. Thus, the outright prohibitions (disengagement) used by some associations may benecessary, but could be less ideal in the long run than a more subtle approach that engages business totake steps towards enterprise environmental sustainability. This, however, does heavily depend on anappropriate policy environment, for example for sustainable charcoal production.

Resources use and environmental regulations

At several of the VSLA sites reviewed here, the groups have set rules and regulations as to which type ofincome generating activities members should be involved in, and which ones are environmentallyunsustainable. In some cases the proponents of the schemes made decisions as to which activitiesshould be prohibited. These prohibitions were then included in the constitutional documents of thegroups. In Zanzibar, for example, charcoal production and wood cutting for sale was prohibited for group

members. This applied a pressure to reduce resource use. Due to the high pressure for fuel wood inSouthern Unguja, and the limited array of alternative business activities, this approach was only partiallyeffective. Charcoal making is a complex issue with a number of relevant perverse policy incentives. Asimilar approach to prohibiting some business activities from groups was also taken in Ruvu and Ruaha.

At Jozani, wild date palm (Phoenix reclinata) fronds are woven into strips (locally called Ukili in Zanzibar)and made into basketry of all kinds. Improvements in both the quality of the basketry and in marketing(locally at the National Park visitor centre and for international export to Europe and USA) of these havemeant that this is a lucrative business for womens groups (including many VSLA members). Harvestingof palm fronds is allowed from within the park, but demand outstrips supply and raw material is now alsobeing purchased from the mainland. Park staff did register some concerns about both the sustainabilityof resources use and the manner of its implementation. Women resource users were supposed to reportto the Park Headquarters before going to harvest but this was not being done. Given the distancesinvolved this requirement is unrealistic (as is often the case with resources harvesting protocols). Withthe advent of widespread mobile/cell phone use the park staff suggested an alternative that they couldbe informed by text message by conservation committee staff, but this protocol has not yet beenestablished.

Peer assessments of the environmental impact of businesses

Peer assessments, and the following enterprise screening mechanism, promote the environmentalsustainability of businesses. VSLAs currently provide a mechanism to assess and improve on thebusiness soundness of the enterprises supported. Each member presents his or her business idea toother group members and the training officers who give feedback. This mechanism could be used to addadditional environmental criteria and environmental sustainability could be peer assessed by the group.The responsibility to take the lead in this activity could be undertaken by a committee member with aspecific environmental responsibility, who could be provided with training to support this.

Generic enterprise environmental screening

As a support to the group peer assessments elaborated above, a generic environmental screeningapproach can be taken which broadly classifies enterprises as environmentally positive, neutral ornegative. A generic screening can be carried out as a programme research activity and VSLA groupsadvised and trained accordingly by support apex organisations or project staff. This kind of screening didnot, however, take place at any of the sites in this study. This would be seen as an initial screeningprocess and more detailed steps might be needed to bring some enterprises into sustainability.Ultimately, judicious government regulation and appropriate policy may be needed for some enterprises.

5.1.2 Household level

At the household level, saving allows households more options when they are trying to meet the financialdemands upon them.


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Choice and options

The resources mobilised by the VSLA methods provide some choice. Some VSLA members received anamount of money they never dreamed possible previously; they then had options to use this in differentways. Providing alternative choices was one of the original ideas behind the establishment of a savingsand loan scheme at Jozani in the first place. At that time the use of forest products (often illegally) was

being used extensively to support cash generation. This, at least in part, was to provide the cash foreducation and health and celebrations such as Maulid and Idd el Fitr. It is now reported that the VSLAsat Jozani provide much of the alternative options for cash sources for periodic or emergency householdneeds and annual events. One component of the VSLA model that supports household choices is thesocial fund which provides micro insurance.

5.1.3 Association level

Peer pressure

When accessing credit through a solidarity group other members of the community immediately have aninterest in a members proposed business. As described under individual businesses (section 5.1.1),each business proposal is presented to the whole group of thirty members, and other members of the

group of five are liable for default on repayments and therefore have an even keener interest. SomeVSLA groups prohibited environmentally damaging businesses (e.g. unsustainable charcoal productionor fishing with small mesh sized nets [see Section 5.1.1]), which have a detrimental effect on the village.Peer pressure then adds to the peer assessment to provide an impetus for people to selectenvironmentally neutral or beneficial business.

Environmental education

Many respondents emphasised the need and importance of environmental education. This was seen asone of the more important protected area activities, it support not only microfinance but overallenvironmental governance. Some of the programmes had used the savings associations as a venue forholding environmental education sessions, and VSL groups are ideal for extension delivery of all kinds.Environmental education also formed part of the business assessments.

Training

According to the respondents, business training in the VSLA model was appreciated and well received.Currently the VSLAs get some training on environmental issues and alternative IGAs, however, this isnot present in the FSA, even at a board level.

Once an association has graduated it is free to make its own rules and regulations regarding membersbehaviour, and it has relatively little contact with support agencies. Thus, the establishment and trainingstage is critical for promoting environmental governance.

Symbolic and ethical environmental links

Many VSLAs use songs, chants or slogans to start their regular meetings. These slogans often establish

ethical and symbolic links with key features of the local environment, educate about certain ecosystemlinks and express principles of good management of the environment. In some cases (for example atthe Mahale Mountains National Park) the chant is printed inside the members pass book. The purposeof these is to reinforce the links to the environment and often reminds group members why the fundshave been secured to support their business activities.

Performances

In some cases groups perform drama and dance at environmental events. (e.g. in Greater Ruahacatchment one VSLA COCOBA drama group performed at a World Environment Day event [see Image7]). These performances communicate, educate and reinforce the message of sustainableenvironmental management.


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Image 7. COCOBA VSLA Drama Group at World Environment Day Celebrations, Mpanga/KipengereGame Reserve, Ruaha, Tanzania. Photo J. Robinson


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5.1.4 Apex level

Training and trainers & apex organisations

The review team found that the village trainers in Ruaha were still being effective, albeit partially, afterWWF had stopped paying them allowances for their work. The trainers had established relationships with

VSLAs despite not being part of an apex organisation and were found to be actively participating in theactivities of the groups.

The long-term interest of every implementing agency in promoting VSLAs is that each group shouldsurvive and that other groups should form. WWF, due to a shift to a new phase of the programme, hadstopped promoting VSLAs in Ruaha. Due to the relatively high (at least at household level) cost oftraining members of new groups, they have managed to create only one or two new VSLAs. There islikely to be minimal new group formation and is thus not likely to create any long-term or visible impact.At Jozani, in contrast, a Local NGO, JOCDO formed to implement the scheme remains an ongoing andactive force after donor support was withdrawn. 48 groups had been formed at the end of the CAREinput in 2004. As of the 2007 field work, the number of groups stands at 200 and extends well beyondthe Jozani immediate area. This is 152 new groups in three years representing about 4,500 households,most of which will be operating new businesses, accumulating savings and taking loans. This translates

into a significant new level of economic activities. One of the reasons why Jozani was selected for aDFID funded study (Anyango et al. 2006) was to learn the lessons once project support ended.

5.1.5 Programme level

Coordinated implementation of the conservation and microfinance components

Co-ordinated implementation of both microfinance and environmental conservation components ofprojects is one of the important lessons of the review. There is a tendency for the microfinancecomponent of conservation projects to be, or become, implemented separately and to lose synergy andeven create conflict. It is very important to ensure that a microfinance component is very well integratedwith other development and conservation components, for maximum effect. This integration does notmean, however, that conservation linkages always need to be writ large e.g. RUMAKI programme.

Where livelihood support and trust building was the main objective of the microfinance component, therewas a deliberate effort to separate these two activities. Where these components were planned to beimplemented in concert, a split between the two components has occurred at Jozani, Kaya Kinondo, andRuvu, the latter causing some institutional conflicts, although these were later, at least partially,remedied.

Trust building

Conflicts are not uncommon around natural resources use and management. Traditional protectedareas have often been established under situations of conflict. Effective microfinance can be a verysuccessful entry point for any project. CARE Tanzania now uses the VSLA approach for the entry pointfor any project whether it be health, education or water and sanitation.

The conservation situation now at Jozani is considered at least somewhat stable. The relationship

between the National Park and Jozani communities overall is good, the core area of the park is 95%protected1. VSLA members rate the microfinance intervention the highest of the many communityconservation activities that have been implemented, while the few non-member groups spoken to rated itsecond after environmental education, due to the support that groups have given the community as awhole.

The RUMAKI programme in fact deliberately aimed not to link the VSLA programme to a marinemanagement component due to the sensitive politics in the project area. The VSLA were named VillageCommunity Banks (VICOBA) and not Community Conservation Banks2 (COCOBA) for this reason. Theirstrategic value was to (i) have a significant livelihood impact and therefore (ii) generate confidence andgoodwill towards the programme, providing an entry point for separate fisheries management initiatives.This is a strategy which appears to have some success.

1 Pers. com. Ali Mwyinyi, Jozani Chwaka Bay National Park Manager2 The difference between these two is primarily in the name, with the CCOCBA aiming to reinforce theconservation links and the model remains the basic VSL in both cases.


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Mechanisms for linking microfinance to environmental sustainability

To be fully effective as an environmental intervention, however, microfinance needs to be part of a suiteof related activities that operate in concert. Its effectiveness as a stand alone conservation action islikely to be at best limited. The other suite of activities will be site specific but may include some of thefollowing:

Enabling policy development; Institutional capacity building (at community, government and civil society levels);

Environmental education;

Common property resource management;

Enterprise development;

Judicious resource protection;

Development and conservation education;

Cost and benefit sharing.

Support to extension services

The VLSA groups are actually quite useful for supporting government or NGO extension services.Training is a strong element of the model with most training focusing on financial management andbusiness skills. The weekly or bi-weekly meetings also provide a venue for training and extension onenvironmental management issues. Once the groups have become established, the pattern of theirmeetings is known. This greatly assists extension planning as field staff know the regular times thatgroups meet and can plan their visit schedules around these, with greatly reduced transaction costs insetting up meetings. These can also be used for other sectoral extension programmes.

Links to institutional environmental governance

As part of this study, it was hypothesised that one mechanism by which microfinance could have animpact on environmental governance would be if the strong positive governance, social cohesion andcollective action of the groups exerted an influence over village level governance. Incidents have been

reported in Malawi where women empowered by membership of a VSLA association have stood up tothe traditional chiefs (J.Ulimwengu, pers.com.). It might be that similar effect may be seen inenvironmental governance.

No effects of this nature were noted during this study. Quite a number of VSLA members were alsomembers of the village conservation committees or equivalent. But no direct effect on the standard ofenvironmental governance was reported by the members during discussions.

For this effect to manifest a number of conditions may be necessary;

Communities where a high percentage of households are members of VSLAs;

Where there are formal links to village governance structures.

Jozani-Chwaka Bay National Park was the only site where the VSLAs were mature enough to be able toindicate this effect. Data was, however, not available regarding the percentage households per village(Shehia). Estimates from two villages Charawe (c.50%) and Pete (


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Nature of environmental pressures

It is important to note that the major pressures on the reserves do not always come from the localinhabitants. Microfinance does not therefore address this issue. The primary driver of unsustainablecharcoal making and wood cutting is inappropriate government policy and urban demand, not localmanagement. While the microfinance efforts at Jozani and Ruvu had some influence on these activities

at group level, there is a limit to what they can achieve [Image 8].

5.1.6 Negative environmental issues

Ongoing wood cutting activities at Jozani

Despite the overall positive picture at Jozani, there were still reports of ongoing wood cutting going on atJozani by VSLA group members. This formed part of the ongoing discussions during the study. It wasnot possible to determine the actual level of wood cutting during a short comparative study of this nature.An informal estimate from one government staff member was that 20% of groups may still beparticipating in some way, this figure should be seen as preliminary. The situation is quite difficult togauge but the following are relevant points:

South Unguja continues to be main source of supply of fuel wood for Zanzibar Town which has apopulation of approximately 300,000 people;

Zanzibar and mainland wood trading is very linked, for example, the increasing control ofharvesting in Rufiji delta is increasing prices, and also pressure in S. Unguja;

The price of charcoal at the time of the survey (June 2007) was actually higher in the JozaniArea than in Zanzibar town, indicating lower supply in the area;

Fuel wood and charcoal remain one of the most viable businesses in the area;

While a significant number of VSL groups are still engaged in wood cutting this is probably lowerthan the population as a whole;

There is a proportion of sustainable charcoal being produced;

Sustainable firewood and charcoal should be a long-term possibility but will require significanthabitat recovery (there are some indications of recovery) and a revision of policy, includingagricultural policy, to remove perverse incentives towards woodcutting.


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Image 8. Illegal charcoal harvesting Ruvu South Forest Reserve for Dar es Salam Microfinanceintervention can have only limited impact on national policy. Photo J. Robinson


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5.2 Social acceptability

5.2.1 Social capital

Repeatedly participants noted the mutually supportive nature of the VSLA solidarity groups. Asmentioned, for some individuals this was more important than the financial benefits.

Box 2. Enhancing Livelihood and Social Status Mwaluma Village, Ruaha Tanzania

A striking result of the microfinance schemes were their impact on income diversification and onincreased individual wealth and status within society. A good example of this came from Mwaluma, asmall village located in the Ruaha River basin in central Tanzania.

When Hamisi first joined his local Community Conservation Bank (COCOBA) solidarity group followingthe VSL model, he was making a living by buying and selling small finger bananas. Occasionally, whenhe could not make ends meet, Hamisi cut firewood from the forest to sell in town. In times of hardship heresorted to unsustainable behaviour and used the forest as a bank, to meet his immediate cash needs.

After joining the COCOBA and learning how to save with the group, Hamisi was able to open his ownsmall but successful food stall. He also managed to raise the necessary funds to move into livestock,where he now fattens cattle before butchering them for profit. Hamisi explained that he had never beenable to save much money before and had therefore not been able to invest big. When he received hisfirst loan, it enabled him to do some good small business, thus gradually building up his business.Hamisi explained that he has since invested in several areas including livestock. He had many positivethings to say about the microfinance groups, which he described as very important people to me, aswell as what COCOBA had done specifically for his life. He summed this up simply as:

COCOBA has given me the chance to be the man I am today, I now have respect.- Hamisi, Mwaluma Village

5.2.2 Social funds

The social funds covering health and education were very much appreciated and ranked highly whenscored. They provide a buffer against emergencies. Often the action audit was deliberately planned tooccur just before a social event or seasonal festival, such as the Islamic festival of Maulid, so memberswould have a lump sum to meet social obligations.

5.2.3 Status

As has been mentioned, the successful groups enhanced social status. Often members improved their

housing. Membership also conferred increased credit worthiness enabling members to borrow moneyfrom other sources, for example from other family members who have the confidence that loans will berepaid.

5.2.4 Early graduation

The length and level of support to microfinance projects is important: they are long-term efforts and tooearly graduation can leave projects feeling abandoned. This was the case with the Ruaha (WWF) andRuvu (CARE) groups. Motivation has been identified as a livelihood flow. And in this sense follow up,contact and communication helps maintain the motivation of groups.

5.2.5 Cultural and religious issues

Zanzibar implementers have sought the advice of the Chief Mufti on religious issues related to VSLAsand particularly regarding interest. The VSLAs were approved on the basis that the interest forms part ofthe savings and is ultimately returned to the saver. One member, however, dropped out of a group earlydue to religious concerns.


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5.2.6 Trust breaking

Community memories are long when it comes to making losses from failed microfinance projects, andthere is thus an imperative to providing sufficient inputs for successful projects. At a number ofinterviewees at different sites recalled (sometimes bitterly), previous bad experiences with microfinanceinitiatives.

5.3 Financial viabilityThe following are some findings related to financial viability and scheme design.

5.3.1 Scheme implementation

Start up funds

Several of the schemes (Jozani, Ruaha, and RUMAKI) gave grants or loans in the first instance. Grantswere given at Jozani but dropped fairly early. External funding through either a loan or a grant did not,however, disrupt the concept of savings in the VSLAs. At Ruaha an interest free loan was given togroups at the end of the training session (after 16 -22 weeks) matching the amount the group had saved

from members weekly deposits. In this way, the groups financial capacity was increased. All groups inRuaha refunded their matching loan on time and without problems.

In RUMAKI matching loans were given to all 63 groups and were talked about in positive terms byrecipients and programme implementers and seems to have been an important factor in raisingconfidence and morale and enabled groups to start disbursing loans earlier than they would otherwisehave done. In some instances, the start up funds might have created the expectation that new groupsshould get the same level of assistance when they form. This may present a hurdle for the implementingagency to keep providing these start-up funds if they are not available. Experience has shown in anumber of places that projects can effectively start without start-up funds. The advantages ordisadvantages of start-up funding should be further examined.

Image 9. Institutional analysis with a VSL focus group held during the study. Photo J. Robinson


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Loan repayment system

It is recommended that loan repayment should be in small amounts and on a regular basis, not in a lumpsum final payment. Weekly payments are preferable and should be flexible to meet cash flowrequirements of the borrower.

Loan insuranceIt recommended that appropriate assessment should be made to determine the level of risks so as tohave premiums which do not create an extra burden to members of the community. Some of theinsurance rates seem to be set very high which, despite the fact this money remains within the group,places a burden on individual repayment.

Short Term Loans

One of the limiting factors of the VSLA model in terms of promoting positive environmental impact is theshort term nature of loan provision, i.e. between 3 and 6 months. This prevents longer term investmenttowards sustainability in situations where agriculture is the main economic activity. (E.g. Ruaha). Three-month loans enable participants to make investments and tackle seasonal financial shortfalls that theymay previously have used the protected area or income from other unsustainable sources. There are

plenty of examples outlined above of people bettering their situation and moving away from resourcedependency, however, it was clear from the focus group discussions that there is a limit to theachievements of the loans when a person is looking for short term profit. Therefore, this becomes anenvironmental issue as much as a financial sustainability issue. This highlights the need for a MFI to bemeeting the financial needs of members in order to influence their behaviour. VSLAs have been seen toremove the pressure from protected areas by addressing seasonality, however, some moves towardssustainable development may require more investment than a VSLA can offer.

Indicative performance of VSLA and SACCOS

Data derived from RUMAKI allowed a comparative analysis between the SACCOS and VSLA models.The VSLA model is savings driven, however, available data from VSLAs promoted by WWF in Kilwa,Mafia and Rufiji indicates that the total loans given actually exceed total savings. By December 31, 2006

(approx. 2 years of operation), data from VSLA promoted and supported by the WWF savingscomponent of the programme was just over 46.5 Million Tsh (US$ 42,507) but represented only 56% ofthe total amount of loans issued, which was over 86 million Tsh (US$ 76,902). It should be borne in mindthat the loans were also funded by some loans from WWF, fines, interest income, gifts and insurance. Incomparing the performance of the VSLA model with that of the SACCOS (Table 3) in the RUMAKIproject it can be seen that a smaller VSLA membership (63%) with smaller capital support (72%) hadsaved more (122%) and lent more than double the loan value (229%) in half the time (2 years).

ModelYrsest

Totalmembers

Savings Loans WWF Loans

TSh US$ TSh US$ TSh US$SACCOS 4 840 38,947,000 34,774 29,815,904 26,621 18,000,000 16,071VSLA 2 528 47,607,400 42,507 86,130,000 76,902 13,000,000 11,607% diff. 63% 122% 229% 72%

Table 3. Comparison of the funds mobilised from SACCOS and VSL in RUMAKI

5.3.2 Impact on the poor

Poverty alleviation

Although group membership may not have fully moved members out of poverty, all the VSLA membersinterviewed considered themselves to be better off and, in some cases, this has led to the ability to make


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a choice and move away from a dependence on unsustainable resource use. The poverty alleviationimpact for Zanzibar, one of the more mature schemes, is well documented (Anyango, et al. 2006, 2007).

To better understand the patterns of benefits derived from microfinance, a tracking tool or monitoringmethodology could be useful. Ideally this would be used by the groups themselves as part of theirinternal monitoring.

Reaching the Poorest

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Microfinance in East Africa WWF Care LTS

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