Informal savings schemes and household welfare in Northern Uganda: a case study of Amuru District
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Households in Amuru district and Northern Uganda at large are associated with very poor welfare conditions. The indices of household welfare in the region have deteriorated over time despite participation in informal savings schemes such as Village Savings and Loan Associations (VSLAs) among others. There was therefore need to carry out a scientific investigation to establish the impact of VSLAs on household welfare or socio - economic status (SES). The study was conducted in the Northern Uganda district of Amuru. Primary data was collected from a total of 174 respondents (households) who were; old VSLA participants, non - participants and new participants (each group comprising of 58 respondents). Comparisons of the old VSLA participants were made against the non and new participants regarding the indicators of SES or welfare such as; the mean monthly income, the mean asset index (possession scores), the mean education expenditure and the mean number of Income Generating Activities (IGAs) initiated and being operated as a result of participation in VSLAs. The means of the asset index of VSLA participants were also compared on the basis of pre – VSLA membership and post - VSLA membership. Mean differences were compared and tested using the two sample t – test. The method of Principal Component Analysis (PCA) was used to compute the asset index. To further examine the role of VSLAs in enhancing rural household’s welfare, the method of Ordinary Least Squares (OLS) was used to analyze the impact of participation in VSLAs on household asset accumulation (represented by the asset index). On education, a logistic regression analysis was carried out to analyze the impact of participation in VSLAs on school drop - out rates. The OLS method was also employed to investigate the impact of participation in VSLAs on the number of IGAs initiated and being operated. The key findings of the study are as follow: the average monthly income of the old VSLA participants is statistically significantly different from and larger than those of the non and new participants. The mean asset index of the old VSLA participants is also statistically significantly different from and larger than the ones for the non and new participants. Results also revealed that the mean asset index under post – VSLA membership is statistically significantly different from and higher than that of the pre – VSLA membership. Further evidence from regression analysis showed that there is a positive and significant relationship between participation in VSLAs and household asset accumulation. Considering education, the mean education expenditure of the old VSLA participants was found to be statistically significantly different from and larger than those of the non and new VSLA participants. The results also show that participation in VSLAs significantly reduces the probability of having school drop – out children in the family. Lastly, it was evident that participation in VSLAs and the monthly savings made by the VSLA members into the association’s savings pool have a positive and significant impact on the number of IGAs initiated and being operated by the participants under the study. Overall, the conclusion of the study is that based on the evidence gathered, VSLAs are playing an important role in enhancing rural household welfare, manifested by; improvement of household income, supporting household asset accumulation, supporting the education expenditure for rural household’s children, reducing the school drop – out rates amongst rural households and supporting the development and diversification of IGAs by households. It is therefore recommended that; the government and development agencies should encourage the development of VSLAs and the general community should be sensitized about the significance of savings. Other activities like agricultural extension services can be integrated into the activities of VSLAs, and formal financial sector actors can design policies which include creation of linkages with the rural - based financial services associations like VSLAs.