Participation, Income Effect and Challenges of Village Savings and Loans Program in Garu and Tempane Districts of the Upper East Region, Ghana

Village Savings and Loans Associations (VSLAs), have the aim of reducing poverty and creating assets to rural dwellers who have limited access to formal finance due to high collateral requirements. However, since the implementation of VSLAs in the Garu and Tempane districts for over a decade, there is inadequate evidence as to the impact of VSLAs on the lives of the participants. Not only that, there is the need to find out the current and anticipated challenges faced by the participants in the program. This study analyzed the effect of VSLAs on the income of households in Garu and Tempane districts. Data was collected from 100 respondents, 50 direct beneficiaries and 50 non beneficiaries from 3 and 2 communities in Garu and Tempane districts respectively. A Heckman treatment effect model was used to analyze the determinants of participation and the effect of participation on income. The results showed that participants of the VSLA program had an annual income of about GH₵ 2016.60 more than the non-participants. Decision to join VSLAs is mainly influenced by age, the years a respondent spends in the community, the number of active labor force in a household and whether a respondent is a native or migrant. However, based on the challenges identified, it is recommended that the government and other institutions interested in rural development should institute appropriate policies that will help enhance participation in the program. Also, the associations should enforce tougher sanctions on members who absent themselves from meetings without prior notice.