Analysis of the effects of village savings and loan associations on the purchasing power of households in Sironko district

Abstract

Due to limited access of the rural/Village people to the formal microfinance institutions which have been an important element in improving people household socio-economic welfare in developing countries, there has been introduction of Village Savings and Loan Associations (VSLAs) which is informal microfinance as an alternative mechanism for saving and borrowing that do not involve support from a founding organization or government finance institutions or any external capital. Thus, this study was conducted to assess the effects of Village savings and loan associations Participation on the purchasing power of household (in terms of asset acquisition, expenditure improvement, investment and inclusive decision making) in Sironko district, Uganda. The study used both quantitative and qualitative research methodology in order to accomplish the specific objectives and collected data using questionnaires and focus group discussion from 287 sample VSLA Participants. The study used chi-square test and fisher’s exact test since some expected counts were less than 5 at 95% level of confidence to test the hypotheses and the results indicated that VSLA participation have a positive impact on income increase at chi-square value 64.030 and p-value 0.000 with the majority (60.0%) of old showing a very high significant increase, also fisher’s exact test value of 28.348 and p-value of 0.000 expenditure in terms of acquiring household assets, affording food diet , health care and education was statistically significant with positive improvements to VSLA participants, a positive influence on participant households running an income generating activity was also statistically significant at fisher’s exact test value 22.382 and p-value 0.000 and finally, ability of household to make decisions inclusively was found to be statistically significant at chi-square value 47.227 (p-value=0.000), however the findings on those who have participated for less than a year or not all were all statistically significant. The results from the focus group discussions were also consistent with the ones from the hypotheses. From the findings, the study concluded that VSLA participation has a significant positive impact on increasing household income and eases the purchasing ability of households to easily acquire assets, education, food and health care and hence therefore, recommends that VSLA is doing great work in improving socio-economic welfare of participating households in Sironko and government and non-governmental organizations should extend solid support for great expansion of VSLA activities in the district and country at large.