Village savings and loan associations and household welfare: Evidence from Eastern and Western Zambia

This study uses propensity score matching (PSM) and data from Eastern and Western Zambia to estimate the impact of participation in village savings and loan associations (VSLAs) on consumption expenditure among rural households. As a proxy for welfare, consumption expenditure is often argued to be more reliable and less prone to under-reporting errors than income. The results indicate large positive and statistically significant consumption effects of participation in VSLAs. As much as 38% and 17% of total and per capita weekly household expenditure respectively can be attributed to participation in VSLA interventions. This is consistent with most prior studies and seems to suggest that, if properly designed and implemented, informal savings and lending initiatives equally have the capacity to contribute to rural poverty alleviation by facilitating access to affordable credit through savings