Six Steps to Unlock Formal Credit Through VSLAs

Village Savings and Loan Associations (VSLAs) serve as a vital financial tool for low-income individuals around the world, particularly women, by enabling them to save collectively, access small loans and build financial resilience. However, VSLAs can be constrained by limited lending capacities (typically between $50-200), and as women entrepreneurs grow their businesses, they increasingly need larger loans from formal financial service providers (FSPs).

FSPs, however, often hesitate to serve this segment due to the absence of structured financial records and conventional credit scores. They frequently view lending to women working in the informal economy, and in rural and remote communities, as risky and cost prohibitive. This supply-demand gap persists despite global evidence showing that women and women-owned businesses are better borrowers, savers and long-term clients, thus highlighting the need for formal credit solutions tailored specifically for women. 

Women-centered design for better products 

To address these challenges, and to intentionally design products for women in VSLAs, CARE uses Women-Centered Design (WCD). This innovation process, similar to human-centered design, involves rapid and deep engagements with the target audience, creative research methods and tools, and an iterative process to co-design better products. 

Co-design of tailored digital loan products means engaging both VSLA members and FSPs to ensure the design incorporates the preferences and perspectives of the women who will use the product, while also remaining commercially viable and aligned with FSPs’ business objectives. Through iterative design sprints we facilitated in 2024, our CARE team took in user feedback at each stage, enabling rapid refinement of products.

As part of this process, we conducted in-depth interviews, focus group discussions, ideation workshops and prototype testing, helping us uncover the following takeaways to influence program design:

• Limited digital access: Most VSLA members still use basic or feature phones; thus, digital lending must not rely solely on smartphones.
• Simplified documentation and enhanced guidance: Loan access is improved by accepting VSLA IDs and mobile numbers instead of national IDs. Interactive guides and targeted digital literacy training further reduce user confusion and dropout.
• Business coaching incentives: Women highlighted business coaching as crucial for preventing over-indebtedness and increasing repayment success.
• Transparency: Clear explanations of loan terms—interest, monthly repayments and outstanding balances—are vital for trust and consistent loan use.

The power of partnerships

Once we had gathered our learnings from the design sprints, we convened a coalition to pilot and further develop the products we had designed. Each of these partners contributes their unique expertise to creating practical, scalable solutions for VSLA members transitioning to formal credit:

• CARE, pioneer of the global VSLA model, provides technical expertise in women’s economic growth and financial inclusion, and ensures products are designed with women in mind.
• Ensibuuko, a pan-African fintech company, manages the Chomoka platform—a mobile application that digitizes savings group records and helps users build formal financial profiles. Ensibuuko also develops new technologies and distributes loans through its network of Digital Community Entrepreneurs.
• GnuGrid, a Ugandan firm specializing in alternative credit scoring, supports the development of scoring algorithms aligned with national practices.
• Financial Service Providers (FSPs), including banks and MFIs, design and offer tailored lending products for VSLAs and their members.
• Mobile Network Operators, such as Airtel and MTN, enable digital wallets and agent networks for accessible cash-in/cash-out services.

A promotional flyer advertising MyChomoka loans—part of a new digital credit product designed specifically for VSLA members running small businesses. The offering allows eligible borrowers to access 1–5 million shillings ($260-$1,300) within 24 hours, with repayment terms developed in consultation with women entrepreneurs and financial service providers.

Refining a Digital Scoring + Lending Model

Based on the learnings from the women-centered design activities, the partners ultimately landed on an approach which includes the following steps:

1. Digitization of VSLA Records: Over the past two years, many groups have already begun transitioning from paper records to the Chomoka app developed by CARE and now managed by Ensibuuko. With support from CARE’s community-based trainers, groups can more easily track savings and loans, and calculate profit distributions at the end of each cycle using the app.
2. Credit Scoring: Over the course of 6 to 12 months, transactions recorded in Chomoka generate key data points that can be fed into an alternative credit scoring model. Leveraging GnuGrid’s expertise, credit scores are developed for both VSLA groups and individual members, creating trusted risk profiles for FSPs to lend to new customers.
3. Loan Product Customization with FSPs: CARE has already begun working with FSPs to customize loan product offerings for women entrepreneurs. With FINCA as a first mover and the possibility to onboard additional banks and MFIs in the future, a variety of loan products will eventually serve women with appropriate loan amounts, interest rates, loan terms, and repayment options.
4. Digital Lending via USSD: Once credit scores are established, qualified groups and individuals can apply for loans via phone. Using USSD, users dial a short code, navigate simple menu options, and receive instant loan approval. Loan funds are automatically distributed from the FSP into mobile money wallets and can be withdrawn from the broad network of mobile money agents around the country.  A smartphone app interface may be added over time.
5. Loan Repayments: Borrowers repay monthly through mobile money agents. Successful repayment boosts credit scores and unlocks access to larger loans.
6. Ongoing Support: Alongside onboarding to Chomoka, CARE’s community-based trainers and Ensibuuko’s local Digital Champions continue supporting VSLAs, building trust in the product and offering bi-weekly business coaching to borrowers.
    

VSLA members in Uganda test out USSD-based loan applications during CARE’s product prototype sessions. Designed for accessibility and ease of use, these tools ensure that even women with basic phones can navigate digital credit products confidently.

Pilot and Scaling for Broader Adoption

The pilot phase in 2025 in Uganda will involve digitizing records of 200 VSLAs with approximately 5,000 individual members, 75% of whom are women. An estimated 10% of participants—around 375 women—will be able to access loans ranging from $300 to $5,000. Success in this phase will demonstrate the viability of alternative credit scoring and inform efforts to scale the model across additional financial institutions and markets like Tanzania and elsewhere in late 2025 and 2026.

By establishing a robust, data-driven approach to credit assessment, this initiative ultimately aims to build on the personal growth VSLA members have achieved to date and create clearer pathways for financial inclusion and further business growth in the future.