Although poverty in Uganda has declined significantly over the past two decades, it remains a persistent development challenge. According to the Uganda Bureau of Statistics (UBOS, 2023/24), approximately 16 per cent of the rural population–an estimated seven million men, women and children, continue to live below the national rural poverty line. This challenge remains deeply entrenched in rural areas, which are home to about 73 per cent of Uganda’s population, underscoring the need for targeted and sustained interventions.
Twelve of Uganda’s thirteen refugee settlements are located in rural districts across the country, and individuals forcibly displaced from neighbouring countries continue to arrive, with the majority being resettled in these designated locations. Owing to the limited social and economic opportunities endemic in many rural areas, both refugees and host communities face high levels of vulnerability and extreme poverty. This is particularly evident in their limited access to inclusive financial services and products, which constrains individual and household productivity, undermines the development of a positive and consistent savings culture, and restricts access to appropriate loan and borrowing mechanisms.
To address this gap, the Sustainable Market Inclusive Livelihood Pathways to Self-Reliance (SMILES) project, funded by the IKEA Foundation and implemented by AVSI Foundation in partnership with Innovations for Poverty Action (IPA), REPARLE, Makerere University Kampala, and DAI, adopted a Graduation Approach and Market Systems Development that integrates Village Savings and Loans Associations (VSLAs) as a core component.
What are Village Savings and Loans Associations ?
Village Savings and Loans Associations are self-managed groups comprising 15–30 members, mainly primary participants who are either women or male youth, who regularly save money, provide loans to one another and earn interest on their savings. A typical VSLA cycle lasts between 8 and 12 months, at the end of which members receive their accumulated savings together with the interest earned through a process known as a share-out.
Under the first cohort of the SMILES Project, a total of 297 VSLAs were formed and supported across Kyaka II and Kyangwali Refugee Settlements as well as the surrounding host communities. The average share value was UGX 2,000 with members saving an average of three shares per week, equivalent to UGX 6,000. The combination of VSLA methodology training, appreciation of the savings approach, targeted cash interventions and the initiation of household income-generating activities encouraged regular and consistent savings among participants. Over a 12-month cycle, these groups collectively saved and shared out a total of UGX 2.42 billion.
The VSLA groups prepared for share-out in accordance with their internal rules and regulations. As the share-out period approached, groups reduced the issuance of new loans, adjusted loan amounts, and shortened repayment periods to ensure all funds were recovered ahead of the share-out date. In addition, community-based trainers conducted refresher sessions on share-out procedures for all members, reinforcing transparency and accountability throughout the process.
Post share-out survey: What we learned
To assess the impact of the share-out, AVSI Foundation conducted a Post Share-Out Survey involving 1,418 VSLA members (735 host community members and 683 refugees). The survey was administered one month after the share-out and examined the use of VSLA-distributed funds, levels of participant satisfaction, household-level challenges, and changes in participant behaviour.
- Business investment ranked highest among reported uses of share-out funds, with 61 per cent of respondents (68.2 per cent of refugees and 55.8 per cent of host community members) investing in business activities. This outcome is largely attributed to the project’s deliberate emphasis on business skills development and financial literacy training. In addition, all households established savings goals at the outset of the savings cycle, the majority of which were investment-oriented. A further 9.5 per cent of respondents used the funds for shelter improvement, while others prioritised school fees, medical expenses, food purchases, debt repayment, and savings.
Agriculture emerged as the leading income-generating activity, with 70 per cent of business investors engaging in the sector–40.4 per cent in livestock production and 30.3 per cent in crop farming. This trend is closely linked to the project’s training in good agronomic practices, livestock production and management, and farming as a business. In addition, 27.5 per cent of respondents established non-farm small enterprises, with a higher proportion among refugees (32.1 per cent) than host community members (23 per cent), likely reflecting limited access to land within the settlements.
With regard to satisfaction with the share-out process, 95.8 per cent of participants reported being satisfied. Satisfaction levels were slightly higher among host community members (98.5 per cent) compared to refugees (92.8 per cent). The small proportion of dissatisfied participants cited issues such as loan defaults and a lack of cooperation among management committee members.Encouragingly, 98 per cent of participants reported no household conflict following the share-out. This outcome is attributed to the project’s household-level approach, in which men and women jointly plan and make decisions for their family’s wellbeing. In addition, coaching sessions addressed harmful gender norms that often contribute to household conflict. However, 20 households did report challenges, including disagreements over the use of funds (13 cases), domestic violence or heightened household tension (3 cases), and unauthorised use of funds by a spouse or relative (4 cases).
- Lastly, the share-out experience served as a springboard for further growth. 85 per cent of participants planned to increase their savings in the subsequent VSLA cycle, 54 per cent joined additional groups, 30 per cent strengthened their commitment to existing groups, and 23 per cent encouraged others to join VSLAs. These positive outcomes were largely driven by the share-out results and the transparency of the processes involved. Moreover, the presence of clear internal rules and regulations helped to minimise non-repayment issues that often discourage participation in group saving schemes.
Recommendations to strengthen outcomes
- Provide tailored capacity building for VSLA committee members in transparency, accountability, and loan management.
- Leverage motivated participants as VSLA champions to expand outreach and sustainability through peer influence.
Conclusion
The SMILES Project Post Share-Out Survey reaffirms the transformative impact of VSLAs on livelihoods, ranging from business start-up and expansion to home improvements and support for children’s education. These findings underscore the importance of investing in and strengthening VSLAs, promoting community-based savings, and empowering both refugee and host households to achieve self-reliance, resilience, and renewed hope. With sustained support, these savings groups can become lasting drivers of inclusive economic empowerment.
