Toddler takes first steps in finance
A Tanzanian toddler found abandoned on a stranger’s doorstep is taking his first steps toward a secure financial future with help from Plan.
Abandoned on a stranger's doorstep just hours after his birth, wrapped in only a polythene bag, little Paulo’s chances of survival were low when he was first discovered. But after being taken in by Lucia, the woman at whose house he had been left, Paulo is now a thriving toddler — a toddler with an advantage:
Paulo is a toddler with his own savings account.
Plan's helpIn a region where most people don’t belong to banks because of low income and lack of economic activity, Paulo is benefiting from a local Village Savings and Loan Association (VSLA) set up in his community with help from Plan.
Village Savings and Loans Associations (VSLA) are groups of villagers trained to work like miniature banks. Members, who are trained by Plan officials and local partners, decide on interest rates and payment schedules for loans, as well as on rates for savings. Each member agrees to pay a weekly contribution and is entitled to ask for a loan which must be paid back.
Although loans can be used for anything, most are taken to buy businesses and materials or to provide in some way for a families' future. The savings accounts allow people to set aside money for education, health care and family situations.
Thanks to this initiative, Paulo now has his own pool of money from which he can pay toward his future, such as covering the cost of schooling and health care.
Saving for the futureIn February last year, Lucia — who has her own vegetable stall — learned about VSLA from Plan staff working in her village. She learned that if she joined she could have her own savings — something she had never been able to have before. Immediately Lucia saw an opportunity for Paulo as well.
“I wanted so much to save for Paulo’s future,” said Lucia. “So I registered him. Paulo is the member, not me, and this helps me to focus on how useful saving up for him will be.”
Lucia saves around 2,500 Tanzanian shillings a week (around US$2.13) which goes to her village’s savings group. All the members save their own amounts and contribute to the pool of money on a weekly basis, with records of every entry kept.
Taking controlThe VSLA uses the members’ pool of money to give out loans with a payback interest of 10 percent a month — high, but manageable due to the small amounts involved. Lucia expects to receive a return on her savings of up to 90 percent at the end of the year — more than enough to pay for Paulo's education when he is old enough.
"As well as the savings service," says Lucia, "I was given six weeks training in credit and savings. I realized how many opportunities the VSLA groups gave us. We now have a social fund, a health fund, insurance fund and an education fund which help me plan for emergencies and life events.
“I took a loan out and expanded my small vegetable stall business as well and now Paulo can go to school, have health care and enjoy his future, ” said Lucia.
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