An investigation of the Sustainability of Village Savings and Loans Associations (VSLAs) amidst Covid-19 and its impact on household income levels: lessons from Malawi, Sub-Saharan Africa

The outbreak of Covid-19 in 2019 in the city of Wuhan in Hubei Province in the People's Republic of China came with rapid disastrous effects globally [1‐3]. The virus is said to cause respiratory syndrome, and people with prevalent underlying health conditions are more prone to the infection [4‐7]. According to public health experts, the human-to-human viral transfer has caused many deaths as well as considerably negative impact on the economic, social, and political activities globally [8‐12]. Scholars have written on how Covid-19 impacts the global economies such that no single country has been spared from its fate [4, 9, 13‐15].

Over the past decades, there has been a proliferation of groups of people with common economic targets and desires to generate and save money among themselves. More than two people with common interests come together to form a Village Savings and Loans Associations (VSLAs) group with the aim of saving, borrowing, and even making insurance funds in the form of shares that they buy at the beginning and act as the amount of contribution per defined period. Countries across the globe have different terms for these Village Savings and Loans Associations (VSLAs), irrespective of the groups bearing the same goals [16]. For instance, in Egypt, they are called Rotating Savings and Credit Associations (ROSCAs) or, Accumulated Savings and Credit Associations [17, 18]. Loans obtained from these associations are of low interest compared to other microfinance banks. Many of these VSLAs are not registered with the registrar of the business. They usually act on a trust basis since they just unite people from the same village, workplace, church, or any other common ground. Usually, the activity runs for a cycle of one year or so. After the end of the cycle, the members share the dividends themselves [19, 20].

VSLAs have for the past decades or so proven to be one of the remarkable tools, platforms, modes, or drivers of economies worldwide, which have positively impacting the living standards of the rural dwellers, especially in developing countries [21, 22]. For instance, out of 176 of the significant and most sustainable Micro Finance Institutions (MFIs) found in seventeen Latin American countries, forty-seven of them are into village banking [23]. Besides, the literature indicates that in African countries like Ghana, Malawi, Rwanda, Kenya, Sierra Leone, Egypt, Ethiopia, Uganda, Nigeria, where CARE international and VSLAs Associates implement their programs, similar impacts of VSLAs on members' lives and the economy, in general, have manifested [21, 24‐26]. More importantly, the VSLAs have significantly promoted gender equality by empowering women through economic decision-making at household and group levels [18, 21, 27]. Further, the program has helped to reduce or eradicate poverty by increasing the disposal income to individual members as well as increasing agricultural productivity through loans, which enable them to afford farm inputs throughout the cycle [24, 28, 29]. Besides, the VSLAs have helped reduce maternal health problems in developing countries as women can access instant loans to pay for convenient transportation to seek medical relevant attention [26].

While appreciating all the positive impacts of VSLAs, it is worthy to note that the spread of Covid-19 has also affected the operations of these VSLAs, which has further challenged its sustainability. Despite the voluminous literature about the impact of Covid-19 on people's lives, there is little systematic documentation as to how the pandemic has impacted the Village Savings and Loans Associations (VSLAs) performances among residents in developing countries like Malawi. Our study fills this gap by examining the socio-economic status and sustainability of VSLAs. We achieved our goal by answering the following research questions: (i) What is the impact of covid-19 on household income levels (ii) What factors determine the sustainability of VSLAs?

The results of this study reveal that a total number of 402 VSLAs members participated in responding to the survey representing a 100% plus after meeting a target of 399, which was found using the sampling techniques (Table 2).

This study aimed at investigating the predictors associated with the sustainability of Village Savings and Loans Associations (VSLAs) and its impact on household income levels amid Covid-19. Our analyses show an increase in male engagement in social associations such as VSLAs, even though these groups are generally perceived to be for women[27]. We could attribute this development to the fact that most members of VSLAs, especially males, are considerably educated and have a positive mindset towards the groupings. However, it is not surprising to see that the majority of the respondents were unemployed despite having good education achievements. Unemployment remains a huge problem in the least developed countries and Covid-19 has further crippled the economies of poor countries. Our findings are consistent with other recent studies conducted by Governments and Non-Governmental Organisational (NGO) such as United Nations International Children's Emergency Fund (UNICEF) in developing countries like Indonesia [45, 46], Kenya [45, 46], and developed countries like the United States of America (USA) [47], and United Kingdom (UK) [48] where they found that a decline in the levels of employment during the Covid-19 pandemic as the vast majority continue to lose jobs. Most of the current members of VSLAs are adults who can also make well-informed decisions on social-economic investments and social capital set-ups. Being ahead of household automatically pushes them to join such savings groups geared to increasing their disposable income so that they can better support their families. Further, in most African cultures, children are considered a source of wealth. Thus, it is not surprising that many households had more than five members, which is different from European, American, and Asian countries, where households have three to four members on average [49, 50]. Studies have shown that large households are probably one of the contributing factors to unemployment, food shortages, poor women's health, and other economic hardships as faced in many developing countries [51, 52].

Our study has further revealed that the outbreak of Covid-19 has negatively impacted the household income of the VSLAs members. It is evidenced that the income of the vast majority of VSLAs members has drastically declined after the outbreak of Covid-19 compared to the period before Covid-19 began. Thus, the Covid-19 measures in place by authorities in many countries such as lockdowns, curfews, and other social distances in combating the severity of the impact of the pandemic have ironically resulted in these negative consequences on people’s business and economic activities [23, 53]. Our findings agree with many recent studies conducted across the world on the impact of Covid-19 on different sectors of economies and household income due to disruption of the supply chain, agriculture, education, sports, health, and transportations [15, 54, 55]. For example, a recent study conducted in Kenya revealed that households’ income levels of those with low earnings had declined pervasively as many family members were declared redundant in their workplaces, there was a reduced rate of getting gifts, and earnings from remittance rates were also reduced due to Covid-19 [46]. Likewise, a study conducted in the USA agrees with our study as they also found a pervasive decline in household income among individuals during the Covid-19 pandemic [56]. Similar results were found in a study conducted in South Africa where income earnings of most households tremendously declined to lead to severe food shortages in many households [57].

Despite experiencing the negative impact of Covid-19, there is a small percentage of the members who earn above MK10,000 per month and a slight change for those who were in this category of the lower-income bands. This is clear evidence that in developing countries like Malawi, the majority of the population is still not earning a higher income either from work or business. This agrees with some studies that found that in Malawi and other developing countries, the vast majority of the populations are still earning lower income and are living under poverty line [58, 59]. In our study, we can also appreciate the impact of income inequality has played on the households coping strategies during the Covid-19 pandemic. Evidence shows that those falling within the lower income levels (band) are more affected compared to those in medium and higher income levels (bands). Our findings agree with other studies that found that inequality income distribution within a society has impacted differently on households in the context of coping and recovery process during the Covid-19 pandemic period [60, 61], which gives the authorities much attention when it comes to policy implementation to cautions the impact of the Covid-19, and other future related epidemics and pandemics, disasters, etc.

Regarding the sustainability of VSLAs, the results from binary logistic regression revealed that some social-demographic characteristics are significant predictors influencing the sustainability of the VSLAs in the times of Covid-19. First, being a male member had a positive impact on the certainty of the VSLAs. Drawing evidence from some physiological studies, it is argued that males are risk-takers and they tend to have a positive perception of something compared to women (ceteris paribus) [62, 63]. Further, this agrees with another recent study conducted in Spain on Covid-19 risk perception which found that females perceived higher dangers of Covid-19 compared to males [64]. Additionally, a study conducted in the United State of America (USA) also found that females were more afraid of Covid-19 compared to males[65]. Age groups of ≥ 31 years old were more likely to lead to the certainty of sustainability of VSLAs, despite the fact that many factors contribute to the maturity of an individual such as age. Thus, the age group of the individuals who have moved out of adolescence and are said to be mature enough has high experience of life uncertainties[66, 67]. In regards to the fact that Covid-19 outbreak was new to be encountered, but this age-group (≥ 31 years old) having and being experienced with of life of developing countries like of Malawi, and some of Africa in general, had at one point in time experienced some of the other deadly health epidemic and pandemic like Cholera, Malaria, Ebola, etc., thus it can be argued that this could at least reduce their fear, and improved their perception [68].

In continuation, education was also found to be a significant predictor of the sustainability of VSLAs amid Covid-19. Thus, the majority of VSLAs members are educated and have a positive perception of the certainty and sustainability of VSLAs compared to uneducated ones. One could argue that education increases one's awareness, information, and knowledge of something gained through online and other channels of communications dissemination. Hence, this made most educated members be well informed and have knowledge of Covid-19, which helped them to have a positive perception of it, like any other pandemic which needs to be fought with positivity. Our findings are supported and in agreement with a recent study conducted on the topic of Knowledge Attitude and Preventative Practices (KAPs) studies on Covid-19 which found a strong relationship with knowledge, attitude, and perceptions of Covid-19 among different classes of people [69‐71]. Further, on socio-demographic characteristics, we found that occupation is negatively impacted on the certainty of VSLAs. Thus, members of the VSLs who were employed perceived a lack of certainty and sustainability in the VLSAs. This could be explained by the fact that due to the pandemic there was a lot of job insecurity among employees as many firms were, and are at the center of making massive losses due to business disruption either by lockdowns or other social distance preventative measures of Covid-19 [33, 38].

Furthermore, the study found that delayed contribution of shares by members had a positive impact on VSLAs certainty. Our study disagrees with other studies that suggest that the contributions of the shares add to the certainty, performance, and sustainability of the VSLAs [25, 72]. Several reasons could be explained regarding this disagreement, some being the nature of methodology we used, the environmental factors such as Covid-19, as the other studies were not conducted under similar circumstances. However, an increase in the number of people obtaining loans from the group had a negative impact on the certainty of the VSLAs. Not surprisingly, as we also found in this study that there was a positive correlation of members not repaying loans on time. Meaning that, as the number of people obtaining loans increased, members were unable to repay loans on time which could also pose a threat as they were able to deplete the savings without replenishments. Our study also found that meetings had a positive impact on the certainty of the VSLAs. This means that physical and online meetings of the members were able to give each other social strength, hope, and support in achieving their agenda. This finding is also in line with principles of social organizations, formal or informal. Meetings enabled the members to challenge and energize each other. Our results corroborate prolific scholarly evidence in the field of social capital attesting that social gathering improves the mental, physical and social wellbeing [73]. Furthermore, our findings are also in agreement with other Covid-19 related studies where they found that despite being in times of Covid-19, the availability of online platforms and digital transactions, members of village savings were able to meet and transact their business making them cope with the pandemic [74].

This study has found that Covid-19 has negatively impacted the household income of the VSLAs members in Malawi. However, the impact varies based on the level of household earnings. Members of the VSLs with low-income levels are more negatively affected as compared to the medium and the higher income levels respectively. Inequality in income distribution has affected the coping and recovery strategies towards Covid-19 in Malawi. On the other hand, gender, age group, education, shared contributions, and the continuation of meetings were significant predictors associated with the certainty and sustainability of VSLAs. In contrast, occupation and frequency of meetings were not significant predictors regarding the sustainability of VSLAs. Further, head of household, household size, and loan repayment were also not significant predictors using the binary logistic regression model.