VSLA Loans

Village Savings and Loan Associations (VSLAs) allow members to access small loans from the group’s collective savings. These loans are designed to support members’ short-term financial needs and are governed by group-agreed rules to ensure fairness, accountability, and sustainability.

This provides members with access to quick and flexible loans for urgent personal or business needs—without the bureaucracy, high interest rates, or collateral requirements associated with traditional banking systems. This helps strengthen financial inclusion and supports income-generating activities among members.

Purpose of Loans

VSLA loans are typically used for:

• Farming inputs (seeds, fertilizer, tools)
• Business capital (stock for trading, equipment)
• Household needs (school fees, medical bills, emergencies)
• Other personal development activities as approved by the group

Loan Application Process

• Request During Meeting: Members apply for loans during scheduled VSLA meetings.
• Group Approval: All loan requests are subject to group discussion and approval through majority vote.
• Loan Record: Approved loans are recorded in the digital platform.

Approval Process

The goal of the loan approval process is to maintain fairness, transparency, and prevent over-indebtedness. This process is governed by the group’s internal rules and structure, typically involving:

• Elected leaders (Chairperson, Secretary, Treasurer) reviewing the loan request.
• In some cases, a vote or consensus among members is required, particularly for higher loan amounts.
• The approval process often considers the member’s repayment history, current shareholding, and existing outstanding loans.

Loan Amount Determination

The amount a member can borrow is directly linked to their shareholding, which serves as a form of social collateral. The maximum loan limit is determined by the group’s available funds and agreed policies.

• Most groups cap loans at 2x to 3x the member’s total shares.
• For example, if a member holds GH₵100 in shares, they may be eligible for a loan of up to GH₵300.
• This ensures members remain financially responsible and prevents loan defaults that could affect the entire group.

Interest Rates

Loans attract a flat-rate interest, which is predefined in the group's constitution or agreed upon at the start of the cycle.

• Typical rates range from 5% to 10%, applied once on the principal, regardless of the loan term.
• For instance, a GH₵100 loan at 10% flat interest will require GH₵110 total repayment.

This structure is simple to understand and manage within the group context, and interest earned contributes to the group's overall profit pool shared at the end of the cycle.

Repayment Terms

Repayment schedules are generally short-term to ensure liquidity within the group:

• Common repayment periods range between 1 to 3 months
• Repayment is usually made during weekly or biweekly meetings
• Groups may allow early repayment without penalties

Failure to repay on time may result in:

• Fines
• Suspension from accessing future loans
• Affected profit share at the end of the cycle

Loan Performance and Credit Scoring

In Velociti, VSLA loan history feeds into a credit scoring engine:

Positive indicators:

• Timely repayment
• Consistent borrowing and repayment history

Negative indicators:

• Missed repayments
• Borrowing above savings limit

These scores help assess a member’s financial behavior and potential for larger external financing.