IsDB Institute’s Webinar Explores Applicability of Self-Sustaining Financial Inclusion Initiatives
Jeddah, Kingdom of Saudi Arabia, 20 November 2024 - The Islamic Development Bank Institute (IsDBI) hosted a webinar on an innovative self-sustaining financial inclusion model, the Village Savings and Loan Association (VSLA) Model, and its impact on improving the livelihoods of people with low incomes.
The webinar presentation was delivered by Mr. Hugh Allen, the Chief Executive Officer (CEO) of VSL Associates, the organization that developed the savings-driven model. Dr. Hylmun Izhar, a Senior Research Economist at IsDBI, moderated the session.
In his opening remarks, Dr. Sami Al-Suwailem, Acting Director General of IsDBI, noted that the basic principles of Islamic finance, such as helping poor people, avoiding usury, and enabling people to earn a living, are values shared by different cultures and religions.
Mr. Allen gave an overview of the savings groups' global presence and performance, spread across in 77 countries, with a focus on Africa where they are tracking 596,000 groups and 13 million members, 79 percent of whom are female. He highlighted the success of a Sharia-compliant model in Palestine, which formed 437 groups with 8,000 members and a 100 percent loan repayment rate.
Explaining the basic principles and structure of the savings groups, Mr. Allen emphasized that these groups are self-financing, self-managing, and independent, with members selecting each other. The groups are designed to be fully independent after one year to 18 months of training and supervision.
Mr. Allen also explained the savings group functioning and supervision, procedures and impact, digitization, and microfinance challenges. He elaborated on the functioning of a savings group, highlighting the importance of simplicity and visual record-keeping. Mr. Allen concluded his presentation by highlighting some challenges and potential risks associated with microfinance institutions and savings groups.
The two discussants, Mr. Ahmed Ag Aboubacrine, Acting Director of IsDB Independent Evaluation Department, and Dr. Abd Elrhman Saaid Elzahi, Senior Research Economist at IsDBI, spoke on the significance and potential benefits of innovative financial inclusion initiatives.
Mr. Aboubacrine emphasized the importance of financial inclusion initiatives for poverty alleviation and highlighted the role of federations in intermediating capital between surplus and deficit groups.
For his part, Dr. Elzahi stressed the importance of community-based financial inclusion, particularly for rural areas, and the role of NGOs in capacity building. He highlighted the limitations of savings groups, such as informal rules and regulations, limited capital, external shock, scalability, financial literacy, gender dynamics and roan repayment issues. He also suggested potential solutions like establishing a sustainable solidarity fund to address the problem of limited capital, foster scalability, and provide further impact on overall poverty alleviation and technical assistance for financial literacy capacity building.
The questions-and-answers session gave Mr. Allen an opportunity to provide further details on the applicability of the VSLA Model, followed by the closing remarks from Mr. Yahya Rehman, Associate Manager, Knowledge Leaders Section, IsDBI.
The webinar presentation was delivered by Mr. Hugh Allen, the Chief Executive Officer (CEO) of VSL Associates, the organization that developed the savings-driven model. Dr. Hylmun Izhar, a Senior Research Economist at IsDBI, moderated the session.
In his opening remarks, Dr. Sami Al-Suwailem, Acting Director General of IsDBI, noted that the basic principles of Islamic finance, such as helping poor people, avoiding usury, and enabling people to earn a living, are values shared by different cultures and religions.
Mr. Allen gave an overview of the savings groups' global presence and performance, spread across in 77 countries, with a focus on Africa where they are tracking 596,000 groups and 13 million members, 79 percent of whom are female. He highlighted the success of a Sharia-compliant model in Palestine, which formed 437 groups with 8,000 members and a 100 percent loan repayment rate.
Explaining the basic principles and structure of the savings groups, Mr. Allen emphasized that these groups are self-financing, self-managing, and independent, with members selecting each other. The groups are designed to be fully independent after one year to 18 months of training and supervision.
Mr. Allen also explained the savings group functioning and supervision, procedures and impact, digitization, and microfinance challenges. He elaborated on the functioning of a savings group, highlighting the importance of simplicity and visual record-keeping. Mr. Allen concluded his presentation by highlighting some challenges and potential risks associated with microfinance institutions and savings groups.
The two discussants, Mr. Ahmed Ag Aboubacrine, Acting Director of IsDB Independent Evaluation Department, and Dr. Abd Elrhman Saaid Elzahi, Senior Research Economist at IsDBI, spoke on the significance and potential benefits of innovative financial inclusion initiatives.
Mr. Aboubacrine emphasized the importance of financial inclusion initiatives for poverty alleviation and highlighted the role of federations in intermediating capital between surplus and deficit groups.
For his part, Dr. Elzahi stressed the importance of community-based financial inclusion, particularly for rural areas, and the role of NGOs in capacity building. He highlighted the limitations of savings groups, such as informal rules and regulations, limited capital, external shock, scalability, financial literacy, gender dynamics and roan repayment issues. He also suggested potential solutions like establishing a sustainable solidarity fund to address the problem of limited capital, foster scalability, and provide further impact on overall poverty alleviation and technical assistance for financial literacy capacity building.
The questions-and-answers session gave Mr. Allen an opportunity to provide further details on the applicability of the VSLA Model, followed by the closing remarks from Mr. Yahya Rehman, Associate Manager, Knowledge Leaders Section, IsDBI.