This 4 page brief shows how young people are using loans from VESAs to start their own businesses.
Vision Keeps the Mango VESA Growing
Vision Keeps the Mango VESA Growing
Forming Village Economic and Social Associations (VESAs) was a core GRAD intervention. The VESA served as a platform for transferring skills and knowledge and a venue for building mutual trust and gaining leadership experience, particularly for women. Most VESAs functioned well during the project. However, sustained success is not a given, especially after project phase out. To have lasting success, VESA members needed a common vision representing the value they place on working together. The Mango VESA, located in the Guraghe Zone of southern Ethiopia, shows that such groups can continue and grow even without project support.
Mango has 24 members (14 men and 10 women) who are still working together nearly four years after the VESA was formed and 18 months after GRAD stopped providing support. Their shared vision is a key to that success. “We named our VESA Mango because the mango tree bears many fruits, and we want our VESA to have that kind of result for our lives,” says Geta Demisse, the chairman. Building a shared vision of what community problems they want to solve—and supporting aspirations to graduate out of poverty—is a key first step in GRAD’s process of helping a community establish a VESA. That initial investment in a vision gives the group an anchor to continue activities whether the project is there or not.
Like a mango tree, the Mango VESA started small but grew fast. Members each saved 12 birr (44 cents) a month in 2014, when they didn’t have much, and weren’t sure that it would work. GRAD’s VESA approach demonstrates that saving money is possible for even the poorest families, many of whom do not believe that they have enough money to save. For Mango members, their success over the first two years gave them the confidence to invest more. By 2016, when GRAD ended, they had nearly doubled their monthly savings. By the end of 2017, the VESA had saved 80,925 birr ($2,935) saved.
Members liked the savings, but had more ambitious aspirations. The loan amounts they were able to take from their VESA were too small to invest in tranformational opportunities. So GRAD linked the group with the Meklit Micro-Finance Institution (MFI) for requesting larger loans. GRAD worked with Mango and Meklit to develop a plan where both parties would share risk and benefit. Since the members of Mango did not have collateral, they used their savings to convince the MFI to give them loans. For the first round of loans, Mango had to deposit 5,000 birr (185 USD), and selected members accessed 20,600 birr (763 USD). For the second round, the VESA deposited 10,000 birr (370 USD) and accessed 53,000 birr (1,963 USD) in loan capital. Repayment was virtually 100%. This performance helped Mango and Meklit learn to trust each other, and built Mango’s track record as a reliable client. In July 2017—6 months after the project ended—Mango secured an additional 98,000 birr ($3,630) loan, with a year to repay. This time, they did not have to deposit additional funds; their track record was enough.
The Mango VESA has big plans for the future. Once they pay off the current loan, they want to take out a 200,000 birr ($7,407) loan so members can invest as a group in a community grain mill and perhaps other larger businesses. Mango is sustaining their own success, starting from a foundation that GRAD helped them create. The VESA system for savings showed them it was possible to save, even when they had very little money. That track record of financial success led to connections to MFIs and gradually built trust with new market actors. These approaches have created a vision for lasting change.