Two numbers determine whether a savings group includes everyone or quietly excludes the people who need it most: the share value, and the loan ceiling.
Choosing the share value
The share value is the price of one unit of savings. Every member buys at least one and at most five shares each meeting. That range is what makes the model work across different income levels: a member with more income buys five, a member with less buys one, and both remain full members.
Set the value at what the poorest member can afford every single week, in a bad week, not an average one. If the poorest member can manage 2,000 shillings, the share value is 2,000, even if most of the group could afford 5,000. Those members buy more shares instead.
Groups routinely set this too high, because the discussion is led by the more confident and better-off members. Ask the quietest members directly.
Why a maximum of five shares?
Without a ceiling, one wealthy member accumulates most of the fund, takes most of the interest at share-out, and effectively becomes the group's bank. Five is the conventional cap and it keeps the group balanced.
The loan ceiling
The standard rule is that no member may borrow more than three times their own accumulated savings. This does two things. It caps what the group loses to any single default, and it ties borrowing capacity to saving discipline, so the members who have contributed most can access most.
Keep it. Groups that waive the ceiling for a "good opportunity" are the groups that later cannot pay out at share-out.
Setting the service charge
Most VSLAs charge a flat monthly rate on the outstanding loan, commonly 5 to 10 per cent per month. The money returns to the fund and is distributed to members at share-out, so members are paying themselves.
Two cautions. First, at 10 per cent a month, a three-month loan costs 30 per cent, which is heavy for a borrower using it for consumption rather than a productive activity. Second, in Muslim communities a fixed charge on a loan raises a legitimate question about riba. Both are reasons to consider a lower rate, a flat administrative fee, or a profit-sharing structure. Discuss it with a scholar at formation.
Who decides who gets a loan?
The whole group, at the meeting, openly. Not the chairperson, not the treasurer. When applications exceed available cash, discuss the cases side by side and decide together. Publicly refusing a weak application is uncomfortable once and saves the group repeatedly.
Reasonable criteria: the member is up to date on savings, has no outstanding loan, has a use that will generate the repayment, and has not defaulted before.
What happens when someone cannot repay?
Decide this in the constitution, before it happens. A workable approach:
- The member tells the group before the due date, not after.
- The group may extend the term once, with the service charge continuing.
- If the loan cannot be repaid by share-out, it is deducted from the member's own savings.
- A member who defaults twice may not borrow again in that cycle.
Because the loan ceiling is three times savings, a default never wipes out the group. That is precisely why the ceiling exists.
What about lending to non-members?
Do not. The group has no way to enforce repayment, no savings to deduct from, and no social pressure to apply. Every group that tries this learns the same lesson.
A worked share-out example
A group of twenty runs a nine-month cycle. Total savings at the end are 6,000,000 shillings. Interest earned on loans over the cycle is 900,000. A member who bought 200,000 shillings of shares owns 200,000 ÷ 6,000,000, or 3.33 per cent of the fund, and receives 200,000 plus 3.33 per cent of 900,000, which is 29,970. She takes home 229,970 shillings.
Work this out in front of the group at share-out, on paper, member by member. Everyone should be able to see how their own figure was reached.