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VSLA – A Pathway to Access Housing Finances among the Rural Poor

Eunice Louis’s dream to have a decent house has been fulfilled. Eunice has all the reasons to stand tall for accomplishing this basic need. It is where fundamental functions of life like eating and sleeping take place and women and men carry out their roles which are also recognized by the Government of Malawi for instance;

the Malawi Growth and Development Strategy II Sub-Theme 5 of Theme 4 advocates for access to housing by all income groups and improving quality of rural settlements and housing.

Decent and Affordable Housing Subsidy popularly known as Cement and Malata subsidy is one critical policy which envisages in the next 10 to 15 years, there will be no more grass thatched houses and that an estimated 16 000 houses will be built each year.  

Despite Malawi government’s recognition of the role of housing, policy does not engage sufficiently with the issue of housing finance markets, it does so in passing. Availability of housing finance is a key barrier to increasing home ownership and improving the quality of shelter. According to Integrated Household Panel Survey (2013), 41 percent of households reside in traditional housing (constructed of unfired clay bricks and grass thatched roofs). Furthermore, 26 percent of households reside in semi-permanent housing (constructed of a mix of traditional and permanent building materials), and the remaining 33 percent reside in permanent structures (constructed of iron sheets, tiles, burnt bricks and cement).

Expenditure on housing is not a priority for many households in rural areas where 80 percent of Malawians are found. The majority of household income is spent on basic living expenses. The 2014 FinScope study reported that 41 percent of Malawians earn less than MK10 000 (US$18) a month. Nationally, only 10 percent of adults earn a wage or salary, while 23 percent earn their income through their own business and 43 percent through farming.

One would ask, “How did Eunice, a Standard 8 primary school drop-out and a subsistence farmer who lives in a remote village of kapwate, Traditional Authority T/A Nyambi in Machinga District managed to afford a decent house under such circumstances?” The answer lies in Village Savings and Loan Association (VSLA).

In 2014, she joined Nthiniwa VSLA which YONECO established under Gender Equality and Women Empowerment (GEWE) Project which is being supported by the European Union (EU) and UNFPA.

Through the association, Eunice managed to construct a decent house. During share-out of December, 2015, her savings accumulated to MK 105,000.00. With the savings, she managed to buy 30 iron sheets (9 feet 24 iron sheets and 6 feet 6 iron sheets to a tune of MK 64, 800.00. Eunice was residing in a mud and grass thatched house which poses a threat more especially during rainy season and was costly to maintain.

“Each year, I had to maintain the roof of my house like buying plastic paper, grass (Tsekela) as well as labour cost. But all that will be a thing of the past” said Eunice with a smile on her face.

 VSLA has turned out to be an innovative way of improving people’s access to housing finances in remote areas where there is low penetration of formal banking and financial services. According to Findex 2015, only 16.1 percent of adults own an account from a financial institution. Furthermore, only 6 percent borrowed from a financial institution in the past year. With the VSLA initiative, this will be history. As of December, 2015 more than 20 individual women in the areas of T/As Nyambi and Ngokwe have managed to construct decent houses. Not only has this improved quality of her life but it will be a symbol of self in her community.

 “Since I started reaping the benefits of VSLA, my husband has been respecting me so much so that I am able to make major household decisions”. said Eunice. 

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