The rise and fall of digitalization of women-owned micro enterprises and village savings in South Sudan

Muteshi Hilda (PhD)

Village Savings and Loan Associations (VSLAs) are savings groups that have been utilized by development and #humanitarian partners as a tool to enhance financial inclusion and economic empowerment for women. #VSLAs are formed by self-selected members ranging from 15 to 25, whose objective is to save money through periodic contributions and provide loans for group members. The group maintains records of savings and borrowing in a book, and the money is placed in a box (SANDUK) and the key is entrusted with elected group leaders. Non-profit organizations in South Sudan, like in many developing countries, believe that digitalization of the VSLAs presents a transformative opportunity of safety, security, ease of access, and facilitates credit scoring based on the group’s credit history. The effort to digitalize VSLAs is one of the ways to ensure safety and security. Digitalization of VSLA operations will go a long way in helping capture all the manual records; if successful, it will enhance financial inclusion among the unbanked communities in #Africa.

Partners and donors have made efforts to invest in women enterprises and VSLAs as a way of women empowerment and economic growth. The support for VSLAs is to help women borrow from VSLAs to be able to start or improve their businesses. The partners have gone ahead to try and digitalize the VSLAs; some of the projects have not succeeded in empowering women economically through digitalization. SUS-AFRIC conducted an evaluation of the progress made in women's economic empowerment through the digitalization of VSLAs in Juba, South Sudan. To understand the challenges facing the VSLAs, women enterprises, and the barriers towards digitalization, SUS-AFRIC held a series of meetings with VSLA members and conducted a mini survey with VSLA members. Findings indicate that the success of VSLA depends on the success of the individual women enterprises, yet VSLA has been positioned as a tool to help women microenterprises succeed. The question is, which one should come first? There are several reasons why digitalization is not the answer to the challenges facing VSLAs.

1.     Lack of income generating activities

 The primary determinant of VSLA success is the source of income. The evaluation of the survey data showed that some groups include people who do not have any source of income or livelihood. Nonprofit organizations have supported the majority of these groups. The idea of communal savings appealed to the women, who lack a source of income but wanted the loans. Even when they do not have a business, some organizations that support women's groups want to provide them with financial support..

These finances usually end up being utilized for household needs, leaving the group members still depending on organizations for support. Some women rearing poultry as an economic activity sold the chickens to save money in the VSLA so that they could access a loan. This approach was not sustainable because they depleted the income-generating activity. The lack of sustainable income has proved to be a barrier to the success of VSLAs; even before thinking about digitalization, NGOs should consider supporting women to have income-generating activities before the formation of VSLAs. The income-generating activities should be sustainable businesses.

2.     Enabling Environment

Before digitalization, the few women-owned businesses had to thrive, but a harsh business environment is likely to be a barrier to digitalization. The women expressed concerns about the general enabling environment; the harsh realities of expensive business premise rent, inflation, security, and favoritism have made it impossible to operate profitably; women have nothing to save. All the money is spent on operation costs. The groups are facing the challenge of expensive rent; they are charged highly by the shop owners. The prices of goods and commodities in the market keep changing and going high every day, hence making business and savings very difficult. The city council takes monthly taxes of 108,000 SSP from business individuals. This amount is high; they would wish the amount to be reduced to 30,000 SSP per month.

A further twenty-five thousand South Sudanese pounds (25,000 SSP) is charged every month, but safety and security for businesses remain a challenge. The group pays for health cards every three months; that is fifty-five thousand South Sudanese pounds (55,000 SSP). The group requested that the health card could be renewed biannually instead of quarterly. The women believed that if the cost of operation is lowered, they are able to make savings and benefit from the loans. There is a need to advocate for an enabling business environment as we work towards digitalization.

3.    Lack of Legal documents

 The harsh realities of the enabling environment remain a barrier to digitalization; in order to digitalize, the business has to be formalized. Women have  opted out of the agenda of  legalization of their businesses. Most of the women-owned micro-enterprises are not formally registered. The evaluation of the group members businesses revealed that 75% have no registration documents and lack evidence of existence apart from the physical location. In order to benefit from the loans from the financial institutions, it's important that the businesses are formalized. The women, on the other hand, expressed other challenges related to formalization: the required cost of formalization is too high; the cost of permits is  unbearable.  To avoid penalties, they prefer not having permanent business stations. Unless the bottlenecks to formalization  are addressed, the projects supporting women enterprises and financial inclusion will not achieve the desired impact. Without evidence of legality, the banks are not willing to lend to the groups or businesses. This means we are far away from digitalization.

4.      Record keeping

Records are important for providing a credit history and scoring to allow women access to loans from the financial institutions. Digitalization succeeds where manual records have worked. It is expected that groups are able to keep proper manual records before being introduced to the digitalization of VSLAs. Despite members indicating that they had been trained in village savings and credit, most of the groups did not keep proper records. Groups that did not keep proper records were groups whose members had a lower literacy level, not being able to read and write.

It's important that the literacy level of members is considered during formation so that a group should have a blend of members who can leverage each other’s strengths. Further capacity building, coaching, and mentorship are required for groups to keep proper records. The bank requires every group to have a business plan; neither the group members nor the group has a business plan, and this has remained a barrier to accessing the loans through the digital platform. Adult literacy classes remain a key component of economic empowerment if we have to digitalize VSLAs in South Sudan.

5.     Access to mobile phones

In order to digitalize VSLAs and women enterprises, it's important that group members own phones. Mobile phone ownership in Juba is high, and this presents an opportunity for digitalization as opposed to other rural counties. Despite owning phones and having 100% access to mobile money agents, only 32% of the group members were registered with mobile money agents. The literacy level remains critical in registration for mobile money; companies could consider offering assistance to women groups willing to register for mobile money services. The fear of not knowing how this would work is a barrier to women adopting digital VSLAs and digitalizing women's microenterprises. Money in the SANDUK is visible; they know where the SANDUK is, unlike money in a mobile app where the majority cannot access and check the balance. Further training is required on how to operate the digital VSLA.

6.     Group dynamics

Most groups formed by nonprofit organizations lack cohesiveness; they come together for the purpose of the grant, and if grants or loans are delayed, the group members start leaving the group. This is attributed to a lack of common bond, a lack of common vision, and a lack of economic activity for continuity. Lack of proper business activity differentiation makes group members compete among themselves, especially if they sell the same type of services or goods. Groups also face governance challenges and internal conflicts among leadership and group members themselves, whereby other members do not attend meetings and actively participate in the group activities but are expecting equal benefits and support from the group. Members start leaving the group when there is no financial gain.

What kind of support do the VSLAs and women enterprises want?

1.     Support in acquiring vocational skills through a school where they can learn trades such as catering, tailoring, baking, and hairdressing. They believe these skills will enable them to establish businesses and expand their options beyond selling fruits, vegetables, or bread and tea.

2.     Request for training in business management and skills, including how to maintain proper business records and bookkeeping. They believe that with accurate records, banks and microfinance institutions would be more willing to provide loans.

3.     Request for training in product development, packaging, and branding. This will help them present their businesses in an appealing manner, attracting more customers.

4.     Interest in training on technology and communication skills, including the use of social media for advertising goods and services. They also sought training in sales and communication skills to enhance their interactions with customers and boost their sales.

5.     Request for leadership training for their leaders, aimed at enhancing their ability to guide others within their groups and communities. This will help foster positive relationships and promote growth.

6.     Request for training on how to use mobile money, including how to open an account and save money.

Conclusion

Sustainable income generation activities are a key to the success of VSLAs. The VSLAs have a greater role to play in supporting unbanked communities to access credit. Most women enterprises do not meet the required threshold for banking or digital lending because of a lack of formal documents and lack of business records required for credit scoring. Individual members in the group lack the skills and knowledge in business management. They are not able to grow and operate at scale. They struggle with the high cost of operations, making losses until they shut down.

Recommendations

·       There is need to have a discussion with the county government and state to review the permits, taxes, and levies for small businesses.

·       There is need for vocational skills to increase the business alternative for women.

·       There is need to review the terms and conditions and requirements for lending small women owned enterprises.

·       There is need to build capacity if women in business, training on how to enhance different business ideas, how to scale, access to markets, financial management, accounting, record keeping, internal controls,

·       There is need for more training in digital skills, both Digital sanduk and transactions, as well as digital marketing of products.

·       There is need for training in leadership, governance, rule of law, taxation for women to understand the enabling environment dynamics.

·       Conduct periodic training on resource mobilization and VSLA sustainable strategies to avoid dependency on donors