Impact of Village Savings and Loan Associations: Evidence from a cluster randomized trial

Abstract

The vast majority of the world's poor live in rural areas of developing countries with little access to financial services. Setting up Village Savings and Loan Associations (VSLAs) has become an increasingly widespread intervention aimed at improving local financial intermediation. Using a cluster randomized trial we investigate the impact of VSLAs in Northern Malawi over a two year period. We find evidence of positive and significant intention-to-treat effects on several outcomes, including the number of meals consumed per day, household expenditure as measured by the USAID Poverty Assessment Tool, and the number of rooms in the dwelling. This effect is linked to an increase in savings and credit obtained through the VSLAs, which has increased agricultural investments and income from small businesses.