Microfinance in East Africa WWF Care LTS

SUMMARY REPORT
Microfinance and environmental

sustainability at selected sites in Tanzania
and Kenya
Robert Wild, Altemius Millinga and James Robinson
August 2008
Summary report - Microfinance and environment in Tanzania and Kenya, Wild, Millinga, Robinson
Contents
ACKNOWLEDGEMENTS.......................................................................................................................................3
ACRONYMS ...............................................................................................................................................................4
1. EXECUTIVE SUMMARY ...............................................................................................................................1
1.1 MAIN FINDINGS ...........................................................................................................................................1

1.2 LESSONS LEARNT .........................................................................................................................................4
1.3 MAIN RECOMMENDATIONS .........................................................................................................................4
2. BACKGROUND TO THE REVIEW ..............................................................................................................5
3. SITE DESCRIPTIONS .....................................................................................................................................7
3.1 JOZANI-CHWAKA BAY NATIONAL PARK, ZANZIBAR, TANZANIA ..............................................................10

3.2 RUVU SOUTH FOREST RESERVE, TANZANIA ..............................................................................................10
3.3 GREAT RUAHA RIVER CATCHMENT, TANZANIA ........................................................................................10
3.4 RUFIJI, MAFIA AND KILWA SEASCAPE, TANZANIA ....................................................................................11
3.5 KAYAS KINONDO, MUHAKA AND GOGONI, KENYA ...................................................................................11
3.6 LAKE BOGORIA NATIONAL RESERVE, KENYA ...........................................................................................12
4. MICROFINANCE MODELS.........................................................................................................................13
5. DISCUSSION...................................................................................................................................................17
5.1 ENVIRONMENTAL SUSTAINABILITY ...........................................................................................................17

5.2 SOCIAL ACCEPTABILITY .............................................................................................................................25
5.3 FINANCIAL VIABILITY ................................................................................................................................26
5.4 OTHER CONSIDERATIONS ...........................................................................................................................32
6. CONCLUSIONS AND RECOMMENDATIONS.........................................................................................34
7. REFERENCES ................................................................................................................................................34
8. BIBLIOGRAPHY............................................................................................................................................36
Acknowledgements
We would like to thank the numerous people that contributed to this report. First of all the many, many
members of microfinance groups that welcomed us, put up with our questions and helped us understand
their individual and group situations. To the many dedicated community leaders, apex institution, project
and park staff at the six sites that helped us plan and execute the study, often translating for us when
needed and patiently clarifying issues.
Many thanks to the staff of CARE, WWF and TFCG, DCCFF who were very helpful in many ways, in
discussing issues and providing their perspectives on the matters at hand. The study was also a time for
meeting many old friends and making new ones.
Sincere thanks also go to the supporting organisations that provided resources, particularly WWF in
Tanzania and Eastern Africa Regional Programme Office (EARPO), LTS International, CARE
International and the Tanzania Forest Conservation Group. In mentioning a single name, it must be
David Hoyle of WWF-UK for his untiring support for the review.
This report is the product of a joint review exercise by LTS International, Care and WWF; the report has
been produced by LTS International, independent consultants, and is designed as a lessons learning
exercise for adaptive management purposes.
“The group is like my family now, we help each other overcome the problems that we all face”
Juma Musa Juma, Unguja Ukuu, Zanzibar, Tanzania.
Cover Photo: Group member of Mwanzo Migumu (It’s hard at first) Group, Ukguju Ukuu Sheiha (village), Jozani
Forest. Gold is important part of Zanzibar culture, a form of saving, and was given as an indicator of the success of
the microfinance schemes. Photo R. Wild.
Acronyms
ASCA Accumulating Savings and Credit Association
COCOBA Community Conservation Bank (VSLA Variant)
CPR Community Property Resources
DCCFF Department of Commercial Crops, Fruits and Forestry, Zanzibar
EARPO East Africa Regional Programme Office - WWF
EC European Community
EIA Environmental Impact Assessment
FGD Focus Group Discussion
FSA Financial Services Association
GRRC Great Ruaha River Catchment
IMP Integrated Management Plan
JCBCP Jozani-Chwaka Bay Conservation Project, Zanzibar
JECA Jozani Environmental Conservation Association
JOCDO Jozani Credit Development Organisation
KDA K-REP Development Agency
LBNR Lake Bogoria National Reserve
MIMP Mafia Island Marine Park
MF Microfinance
MFI Microfinance Institution
MMD Mata Masu Dubara (Women on the move)
NGO Non-Governmental Organisation
NMK National Museums of Kenya
PA Protected Area
PRA Participatory Rural Appraisal
ROSCA Rotating Savings and Credit Associations
RSFR Ruvu South Forest Reserve
RUCDO Ruvu Credit Development Organisation
RUMAKI Rufiji-Mafia-Kilwa Seascape Project (WWF)
SACCOS Savings and Credit Cooperative Societies
VICOBA Village Community Bank (VSLA Variant)
VSL Village Saving and Loan Model
VSLA Village Saving and Loan Association
1. Executive Summary
Since the mid 1980’s, biodiversity conservation projects in protected areas have aimed to support
sustainable economic development for adjacent communities. While experience in achieving this has
been mixed, a review of conservation and development held at the World Parks Congress in 2003
indicated that the basic models are sound but implementation needs to be improved. This review
explores the role of microfinance schemes as an additional, and possibly key, tool in efforts to both
improve the livelihoods of rural communities living in biodiverse environments, while at the same time to
improve the protection, management and sustainable use of those environments.
The review was carried out of microfinance programmes that aimed to support environmental
conservation projects at six locations in Tanzania and Kenya. Microfinance as a tool for conservation is
being used in other conservation contexts in these countries. The work was a result of collaboration
between WWF, LTS International, CARE Tanzania and the Tanzania Forest Conservation Group. On
Zanzibar the management authority the Department of Commercial Crops, Fruits and Forestry (DCCFF)
supported the project. LTS took a lead in the organisation and execution of the review, WWF-UK
provided the main funding, and other institutions played an active role in planning, site studies, fieldwork
and providing transport as well as technical and field staff support.
The review assessed microfinance objectives against three main criteria:
a) Financial viability: This was assessed both in the long term and short term, including the
strengths and weaknesses of the different microfinance models.
b) Environmental sustainability: Assessed particularly with reference to the biodiversity or
environmental objectives of the projects that have promoted these schemes.
c) Socio-cultural acceptability: Examining the issues of group and broader natural resource
governance, the building of social capital as well as a contribution to poverty alleviation.
The work was carried out over a 6 week period in May and June 2007. The review focused on two of the
four microfinance models implemented at the six sites; the Village Savings and Loan Associations (Allen,
2006 & Allen and Staehle, 2007), and Financial Services Association (Jazyeri, A. 2000) models.
The study used key informant interviews, focus group discussion and semi-structured interviews. 271
microfinance group members took part in focus group discussion and 109 individual interviews of group
members took place. Key informants were also drawn from protected area managers and conservation
project staff.
The details and lessons of the review are contained within this summary report, a financial analysis of
four of the programmes in ‘An Appraisal of the financial performance of Four WWF projects in Kenya and
Tanzania’ (Millinga, 2007) and ‘A Study of Rural Microfinance and its Links with Encouraging Sustainable
Natural Resource Use Surrounding Protected Areas in East Africa’, a dissertation submitted by Robinson
(2007) for the degree of Master of Science. These reports are available for those who wish to access
them.
1.1 Main findings

1. The different models performed very differently across the three main criteria of review.
2. One model, Village Savings and Loans Associations (VSLA), stood out in its performance across
all three sustainability criteria, financial, social and environmental.
1.1.1 Village Savings and Loans Associations (VSLA)

3. The Village Savings and Loans Associations have produced good results and overall members
are satisfied with the financial services they received and, as a result, have been able to make
positive changes to their lives. In communities that have relatively high poverty levels, the
schemes are having some impact (Anyango, et al. 2006, 2007).
4. An often repeated appreciation from many members is the social changes, with the solidarity
groups creating a strongly supportive group framework for personal savings and business
development.
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5. This social component is extremely important to VSLA members and was cited as more
important than the financial gains by several female respondents. Group members often feel
they have improved social status due to their increased wealth and social interactions that group
membership confers.
6. The VSLA performance on environmental criteria did not reach the same level as did the
financial and social components, but nonetheless was making valuable contributions to
environmental management.
7. Improved environmental management, via a microfinance scheme, is to a considerable extent
mediated via the financial and social benefits that the scheme provides, and these have to be
functioning to achieve improved environmental governance. Thus, the three factors are linked:
when individuals, households and solidarity groups are making money and working together
improved environmental governance is possible, but not automatic, and households can make a
wider range of choices. Stated differently - to deliver support to individual or household
businesses a microfinance scheme has to function financially. To support individual or collective
action over environmental management within the groups or wider society, it has to function
socially.
8. Microfinance is unlikely, however, to have positive conservation outputs alone in the absence of
a suite of other conservation interventions (see point 24), and preferably supportive policies and
governance frameworks.
9. Environmental transformation has a complex relationship with livelihood and enterprise
opportunities. However, degraded environments do not provide as many livelihoods options
compared with those in good condition.
10. The overall ecological, social, economic, governance and political context also affects the
operation of the microfinance schemes.
11. Design improvements can be made to all three key aspects of functioning including financial,
social and environmental. Suggestions are made within the report to improve environmental
benefits. These include:
a. Environmental assessments of individual businesses;
b. Generic environmental screening of typical local enterprises;
c. Training in the environmental sustainability of enterprises;
d. Support to, or the setting up of, local resource use regulations;
e. Micro-insurance or social funds to provide an alternative to resources use for household
emergencies or life-cycle events (e.g. festivals and funerals);
f. Ethical pressure towards environmental sustainability;
g. Enhanced environmental education;
h. Reinforcement of environmental links through a cultural dimension;
i. Support to community level natural resources governance.
12. Financially, the main concerns are a) how to expand scheme membership by forming new
groups, b) reaching the poorer members of the community and c) meeting the increased
financial needs of mature groups whose business activities have begin to outgrow the VSLA
model.
13. The initial start-up and training costs of VSLA are relatively high, as each group takes part in a 6-
8 week long training programme. The initial training is, on the one hand, a key reason for the
success of VSL Associations, but on the other hand, a reason why new groups do not readily
form, and in some cases dwindle in number.
14. As the VSLAs are based on members’ savings, not everyone can access loans when they want
to and there is a need to ration funds. Members are normally confident that this problem can be
overcome within the group, with everyone being able to access money when needed. This can,
however, make credit providing institutions an attractive option to members of groups who have
reached this stage.
2
15. In efforts to increase accessibility to the poorer members of the community, projects have
modified the VSLA model by allowing people to make smaller savings on a daily basis.
16. Within the four VSLA sites, the model was being implemented with significant differences which
provide insights for future recommendations for this model. Several of the projects are, however,
relatively young and the full implications of them are not yet developed. The potential for apex
organisations to resolve both the financial and replication challenges is examined. In particular,
the limitation of the NGO/project approach is addressed.
17. Generally microfinance in these contexts is showing promise in not only stimulating higher levels
of environmentally sound economic activities at community level, but also providing a much
sounder platform from which to develop a range of alternative income generating activities than
has hitherto been possible. At Jozani National Park, Zanzibar where the situation is more
mature, and there are significant opportunities, this appears to be the case with, for example, the
development of international export of high quality basketry, the establishment of tourist
restaurants, and the tourism butterfly farm project in the initial stages.
1.1.2 Financial Services Association (FSA)

18. The Financial Services Associations were reviewed at two sites in Kenya; Kaya Kinondo, Kwale
District and Lake Bogoria, Bogoria and Koibatek Districts.
19. The Financial Services Associations at Lake Bogoria are in need of review, adjustment and
increased support, while the FSA at Kaya Kinondo is to some extent holding its own but is not
really delivering effectively on the three criteria. It will need a redesign and an increase in
awareness, training and client outreach to become effective.
20. For the FSAs, the quality of the financial services needs to be improved as does the mechanism
for following up defaulters.
21. An initial training of only 3 days solely for the manager and cashier are considered inadequate.
1.1.3 Other considerations

22. Community memories are long when it comes to making losses from failed microfinance
projects, and there is thus an imperative to provide sufficient inputs to build trust and to ensure
successful projects.
23. The length and level of support to microfinance projects is important: they are long-term efforts
and premature ‘graduation’ can leave projects feeling abandoned.
24. To be fully effective as an environmental intervention, microfinance needs to be part of a suite of
related activities that operate in concert. Its effectiveness as a stand alone conservation action
is likely to be limited. The other suite of activities will be site specific but may include some of
the following:
• Institutional capacity building (at community, government and civil society levels);
• Environmental education;
• Common property resource management;
• Enterprise development;
• Judicious resource protection;
• Development and conservation education;
• Cost and benefit sharing.
.
25. There is a tendency for the microfinance component of conservation projects to be, or become,
implemented separately and to lose synergy or even create conflict. It is very important to
ensure that a microfinance component is well integrated with other development and
conservation components, for most effect.
26. Integrated implementation does not mean, however, that conservation linkages always need to
be writ large. In some situations, e.g. Rufiji-Mafia-Kilwa Seascape Project (RUMAKI), a
3
deliberate separation of approaches may be an appropriate approach where trust building is

needed.
1.2 Lessons learnt

1. The design of the microfinance model is critical to its performance across all three criteria,
financial, social and environmental.
2. Design improvements can be made to enhance performance in each area.
3. Where microfinance is established as contribution to environmental governance it should not be
implemented as a stand alone activity, but well integrated into other development and
conservation activities.
4. The best performing model reached a limit beyond which it needs further financial intermediation.
5. The use of initial matching loans to stimulate group formation was appreciated by project staff
and group members, and were paid back on time, but are not necessary for successful VSLAs.
6. Initial in-depth training is critical and should not be compromised.
7. Factors potentially inhibiting group replication need to be further examined, including initial
matching loans and initial training costs.
8. Like all financial institutions, ongoing and long-term arrangements need to be developed for
support, motivation and financial regulation.
1.3 Main Recommendations

1. Of the models reviewed, the VSLA model performed the best and would appear to be the best
suited to enhancing financial, social and environmental sustainability in many rural and
conservation situations.
2. Further design improvements can be considered to improve performance, especially of
environmental sustainability, but also financial and social components.
3. To be fully effective the FSA model will need review, adjustment and increased support. This is
particularly true at Bogoria, and the project is putting such measures in hand.
4. The initial training input in establishing microfinance projects is very important and should not be
compromised.
5. The role of start up revolving loans for group formation needs further examination.
6. Implementing agencies should aim to put in place long-term support mechanisms for
microfinance activities.
Image 1. Unjuja Ukuu VSL association Jozani Forest Zanzibar. Photo R. Wild
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2. Background to the review
The environmental impact of microfinance has received relatively little study. This comparative study
across six sites and two countries in East Africa, Tanzania and Kenya, examines issues that have not
been studied across locations before. During the study, 271 microfinance group members took part in
focus group discussions and 109 individual interviews of group members took place. A number of
conclusions can be drawn from the study and thus recommendations have been made.
Efforts to support ‘alternative income generating activities’ have been a common feature of many
conservation projects over the last 15-20 years. The alternative income approach aimed at supporting
livelihood activities that were an ‘alternative’ to resource extraction from protected areas with the
objective of reducing the pressure on biodiversity and natural resources. Typical alternative income
generating activities (IGAs) have included tree planting, ecotourism, beekeeping, vegetable growing and
chicken production. These efforts have had mixed results. It is often difficult to substitute one activity
for another. For example the economic value of beekeeping rarely competes with activities such as
charcoal making, and chicken rearing does not substitute for the cultural values of bush meat. The
livelihood needs of many households are such that these activities have marginally supplemented
incomes but not to the extent that the ‘problem’ activities can be abandoned. Problems have been
experienced, such as those people who undertake the alternative are not necessarily the most resource
dependant households. Thus the beneficiaries of these activities are not the same as those harvesting
from protected areas. Further income from such activities has often been reinvested in other
environmentally damaging activities.
Since 1999 a number of projects in Tanzania (Table 1) and Kenya have taken a supplementary approach
through the provision of microfinance. The rapid growth and popularity of many of these efforts has
indicated that they show promise in this challenging area. The objective of the review was therefore to
examine in more detail the performance of these microfinance schemes in the context of protected areas
and other environmental conservation projects. The microfinance component has, therefore, been one
part of a suite of activities in promoting broader sustainable development and conservation, carried out
by a diverse group of institutions with different objectives and under different constraints.
Protected Area District Start Date of Supporting

MF scheme institutions
Jozani-Chwaka Bay National Central & Southern DCCFF/CARE
Park* Districts, Zanzibar 1998
Misali Island Conservation Area N & S Districts, Pemba 2002 DCCFF/CARE
Pugu, Kazimsumbwe & Ruvu* Kisarawe 1999 CARE/TFCG/WCST
Forest Reserves
Mafia Island Marina Park* Mafia 2002 WWF
Rufiji Mafia Kilwa Ramsar site* Rufiji, Kilwa 2006 WWF
Mahale Mountains National Park Kigoma Rural 2003 TANAPA/FZS
Uluguru Mountains Forest Morogoro 2005 CARE
Reserves
Serengeti National Park Loliondo 2004 TANAPA/FZS
DCCFF – Zanzibar Department of Commercial Crops, Fruits and Forestry, CARE – CARE International
in Tanzania, WWF – World Wide Fund for Nature, TANAPA – Tanzania National Parks, FZS – Frankfurt
Zoological Society. * = Case study site under this review.
Table 1. Protected areas with saving schemes in Tanzania
5
The first such microfinance scheme was

introduced to the Jozani-Chwaka Bay
Conservation Area (later to become a National
Park) in Zanzibar, as part of the collaboration
between the Zanzibar Department of
Commercial Crops, Fruit and Forestry
(DCCFF) and CARE International. Jozani
Forest is one of the few remaining natural
forest areas on Zanzibar and only 35 miles
from Zanzibar Town, an urban centre
approaching 300,000 people. Urban demand
for charcoal, firewood and building materials
provides a ready market and the temptation to
illegally harvest forest products to meet urgent
cash needs (e.g. for treating illness or paying
school fees). The forest has in the past been
used as an ‘alternative bank’, providing short-
term cash needs.
In 1999, the Jozani-Chwaka Bay Conservation
Project with a grant from the Ford Foundation
started a community savings and loan
scheme, based on the Bangladesh Grameen
Model. The first year of the programme was
not very successful with low repayment rates,
but after analysing the problems, a model
(MMD now known as VSLA) that CARE was
successfully using in Niger was adopted and
the scheme was converted to this model in Image 2. Red Colobus Monkey, Jozani Forest,
2001-02. In 2003 when the CARE supported Zanzibar, Tanzania. Photo J. Robinson
Jozani-Chwaka Bay Conservation Project
closed, 49 Village Savings and Loan Associations were in operation. In 2006, three years after project
closure, that number had almost tripled to 140. By 2006 a similar scheme at Misali Island Conservation
Area, Pemba had 80 associations.
The model has also been used elsewhere in Tanzania not in the context of protected areas or
environmental projects, for example in the districts of Morogoro, Mbarali, Mbeya, Lindi, Mtwara,
Simanjiro.
During 2005/06 initial discussions were held between LTS International, CARE International, the World
Wide Fund for Nature (Tz), Frankfurt Zoological Society and Tanzania Forest Conservation Group to
take forward a review of these programmes as a joint action with each party contributing in one form or
other. In early 2007 WWF-UK expressed and interest in making a substantial financial contribution to the
review, and requested the inclusion of sites in Kenya. A number of options were explored and finally it
was decided to take the review forward in part as a Master of Science Study as part of the University of
Edinburgh course on Environmental Sustainability. Due to logistical and academic reasons the original
nine sites considered were reduced to six, focusing on those supported by WWF, CARE and TFCG.
These six sites were;
Tanzania: 1) Jozani-Chwaka Bay National Park, Zanzibar; 2) Ruvu South Forest Reserve, Kisarawe
District; 3) Great Ruaha River Catchment, Iringa Region and 4) Rufiji, Mafia and Kilwa Seascape
Districts.
Kenya: 5) Kaya Kinondo Sacred Forest, Kwale District; 6) Lake Bogoria Catchment, Baringo and
Koibatek Districts.
The purpose of this review was to achieve the following ends:

• The generation of lessons learnt regarding microfinance as a conservation intervention;
6
• Determine the impact of the microfinance intervention on poverty reduction and conservation;
• Make recommendations for the use of microfinance in other conservation and environment
settings.
Layout of the report

The review report is in three parts. This document is the summary report.
• Part One This is the summary document that brings together both subsidiary reports and covers
all six sites (Jozani Forest, Zanzibar; Ruvu Forest);
• Part Two This is the financial assessment of the four WWF microfinance schemes, 2 in
Tanzania and 2 in Kenya (Millinga, 2007);
• Part Three This is the main detailed environmental assessment of all sites which, was
submitted to the University of Edinburgh for the degree of MSc (Robinson, 2007).
Review team
The review was hosted by the staff of the different institutions and project staff at each of the locations,
as well as the respective headquarters staff. At different sites key staff involved included at Ruvu South
Forest Reserve - Raymond Nyewla (TFCG); at Jozani-Chwaka Bay National Park - Samira Ali and Ali
Mwinyi (DCCFF), Makonda Vizzer (JOCDO) and George Mkoma (CARE); at RUMAKI - Thomas Chale
(WWF); at Ruaha - Petro Masolwa, at Bogoria Fabian Musila and Sirma Chepkonga; and at Kaya
Kinondo - Elias Kimaru and Hemed Mwafunjo (WWF) . Meetings were held with HQ staff including Jason
Rubens (WWF Tz.), John Salehe (WWF EARPO), George Mkoma, Thabit Masoud, Balaram Thapa
(CARE Tz.), Charles Meshack (TFCG) and Bakari Asseid (DCCFF).
The review team itself was made up of three members:

Robert Wild was the principle investigator and designer of the study. Robert has 20 years of protected
area management experience, 12 years of which was in East Africa. Robert was the Conservation
Advisor to the Jozani-Chwaka Bay Conservation Project working for CARE International when the
decision was taken to initiate microfinance. He also took a lead in the design of the Misitu Yetu Project
which implemented microfinance at the coastal forests near Dar es Salaam including Ruvu South Forest
Reserve. He has provided overall guidance and participated in the field work for Jozani and Kaya
Kinondo sites and is the corresponding author [rob.wild@ltsi.co.uk].
Altemius Millinga is a Tanzanian microfinance expert and advisor, with over 20 years experience of
microfinance in East Africa. He specialises in micro enterprise development, specifically the planning
and implementation of microfinance training programmes, and has worked at both community and
government level and with numerous international organisations. Altemius provided the specialised
microfinance expertise for the four WWF sites of the study.
James Robinson was at the time of the study a student of Environmental Sustainability in the
Geosciences Department of the University of Edinburgh, Scotland. James did the bulk of the field work
and worked at all six sites over a gruelling six week period.
3. Site Descriptions
Six sites were included in the review (Table 2.) in order of establishment;
• Jozani-Chwaka Bay National Park, Unguja Island, Zanzibar, Tanzania.
• Ruvu South Forest Reserve, Kisarawe District, Coast Region, Tanzania.
• Great Ruaha River Catchment, Njombe, Rujewa & Mbarali Districts, Iringa Region, Tanzania.
• Rufiji, Mafia and Kilwa Districts’ coastal and marine areas (Seascape), Tanzania
• Kaya Kinondo Sacred Forest, Kwale District Kenya
• Lake Bogoria Catchment, Baringo and Koibatek Districts, Kenya.
Microfinance schemes for these sites were established over the period 1999-2005 (Figure 1.)
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Table 2. Summary table
Other MF
Population Model
Implementing Apex Main MF
Site Ecosystem density1 Environmental design
Partners organisation model (Bank
(pple/km)
access)
Jozani-Chwaka Swamp, coral rag forest, Grameen Control of illegal wood

DCCFF, CARE, Bank2
Bay National Park, mangrove and coastal 111 JOCDO VSLA cutting and charcoal
JOCDO, JECA
Tz. habitats (some) making
No wood
Ruvu South Forest None
Coastal forest 27 TFCG, RUCDO CARE RUCDO VSLA cutting/charcoal by
Reserve, Tz. (none)
members
SACCOS
Rufiji, Mafia, Kilwa MIMP WWF district in MIMP3 Livelihoods & trust
Coastal marine 27 None VSLA
Seascape, Tz authorities building
(limited)
Great Ruaha River None
Wooded Savannah 34 WWF None VSLA Environmental funds
Catchment, Tz. (none)
Coastal evergreen forest Kaya Elders, NMK, Not well None
Kaya Kinondo, Ke. 54 FSA Poor linkages
remnants WWF linked (several)
Lake Bogoria Saline lake, wetlands, acacia None
13 WWF (CCB &CCK) None FSA No linkages
Catchment, Ke. wooded dry savannah (none)
Table notes:
1. Population Density: For comparison purposes the rural population density in Bangladesh (home of the Grameen model) is c. 1000 pple/km2, these figures are derived
from district averages. The Kilwa population density misleading as the population density on Mafia and the urban areas of Kilwa will be much higher than the district
average.
2. Other Models: The Grameen model was unsuccessful at this site and converted into VSLA. The bracketed refers to other MFI or Bank access at the site.
3. Other Models: SACCOS were established inside the Marine Park, but more recently VSLA have been established outside the park on Mafia Island and also in Kilwa
District
8
JOCDO – Continuing to support

Grameen introduced but CARE - Established new groups and establishment rate
unsuccessful VSLAs increased.
Jozani
CARE - Establishing VSLAs RUCDO – Umbrella Organisation.

under Misitu Yetu. Project VSLAs still forming
Ruvu South
WWF – Facilitated the

establishment of SACCOS WWF –
inside Mafia Marine Park Establishes
VICOBAs
Rufiji, Kilwa,
Mafia
WWF – Establish COCOBAs.
Great Ruaha River

Catchment
Kaya Kinondo FSA established as part of

the Kaya Kinondo Ecotourism Project
Kaya Kinondo
WWF – Direct Some

Support in informal
establishing FSAs support
Lake Bogoria
98 99 00 01 02 03 04 05 06 07
Figure 1. Timeline for the establishment of the microfinance schemes in the review
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3.1 Jozani-Chwaka Bay National Park, Zanzibar, Tanzania

Zanzibar combines the twin islands of Pemba and Unguja and is a semi-autonomous part of United
Republic of Tanzania.
The VSLAs were initiated as part of the Jozani-Chwaka Bay Conservation Project (JCBCP) on Unguja.
The objective of the JCBCP, which started in 1995, was to conserve the unique biodiversity of the multi-
habitat forest reserves within the Jozani-Chwaka Bay Conservation Area (JCBCA), whilst enhancing the
livelihoods of the surrounding communities. CARE initiated the microfinance scheme in 1999 in
partnership with the Department of Commercial Crops, Fruits and Forestry (DCCFF) and the Jozani
Environmental Conservation Association (JECA), a local NGO whose formation was supported by
JCBCP. The Grameen Model was used and transferred directly from a project implemented using this
model in Dar es Salaam (which is still in operation there). This model, however, did not function very
well in the more rural setting of Zanzibar, and by mid 2000 an effort was undertaken for a complete
restructuring of the project using a different microfinance model. The MMD or ‘women on the move’
model from Niger was adopted, and was one of the first times it was used outside Niger.
The savings and loans component was originally designed to be an integrated livelihood component tied
to conservation objectives. During the restructuring it was recommended that JECA did not have
sufficient capacity to support the activity and a new local NGO, Jozani Credit Development Organisation
(JOCDO), was established. At this point the implementation of the microfinance component became
separated to some extent from the conservation interventions. It has been reported that the microfinance
component was not tied to the conservation objectives (Anyango et al. 2006), this was not in fact the
case. However, the environmental objective was not explicitly stated in the individual VSLA constitutions,
but is contained within the overall JOCDO objectives.
CARE trained groups between 2001 and 2002 and stopped actively supporting them in 2002, when
JOCDO took over. This is a self-run apex organisation that was also examined during the study. In 2006
a comprehensive financial review was undertaken of the Zanzibar VSLAs and was published by Anyango
et al. (2007). This report provided the financial information for this study site. For the remainder of the
study the project site will be primarily referred to as ‘Jozani’.
3.2 Ruvu South Forest Reserve, Tanzania

The Ruvu South Forest Reserve is a 35,000 ha mosaic of coastal forest, woodland, thicket, swamp and
grassland in Kibaha and Kisarawe Districts, Coast Region of Tanzania. Approximately 9,800 ha of the
reserve can be considered forest, much of this riparian forest. The reserve is 45 km west of Dar es
Salaam. The Tanzanian Central Line Railway and Tanzania – Zambia railways cuts through the reserve
as does the Kazimzumbwi – Mzenga road.
The reserve was gazetted as a forest reserve in 1967. In 1998 the ‘Misitu Yetu’ project, which translates
into ‘Our Forests’ project, was established as collaboration between different partners including CARE
International and the Tanzania Forest Conservation Group (TFCG). For the remainder of the study the
site will be referred to as Ruvu. Ruvu Credit Development Organisation (RUCDO) is an umbrella
organisation for the VSLA groups, its establishment was facilitated by CARE as they withdrew their
activities from the area in 2003.
3.3 Great Ruaha River Catchment, Tanzania

WWF has been working in the Great Ruaha River Catchment (GRCC) since 2001. Before 2006 there
was a large amount of work done on establishing Water Users Associations (work that still ongoing) and
also facilitating the establishment of the Mpanga/Kipengere and Usanga Game Reserves.
Mpanga/Kipengere Game Reserve Project worked to enhance sustainable management of natural
resources. It has aimed to achieve this through the following activities: facilitating a comprehensive
biodiversity survey of the game reserve, the preparation of its general management plan (GMP), the
undertaking of a socio-economic survey within villages adjacent to Mpanga/Kipengere Game Reserve,
support to community reforestation initiatives, facilitating and assisting in the establishment and
functioning of Village Environmental Committees (VECs), providing environmental conservation
10
education, and facilitating community sensitisation and awareness creation on natural

resources/environmental conservation. The project is also implementing environmental friendly Income
Generation Activities (IGAs) with communities bordering the Mpanga/Kipengere Game Reserve.
Conservation friendly IGAs are seen as an alternative to dependence on natural resources extraction
from within the reserve. The project was jointly implemented by WWF, the Division of Wildlife, the District
Councils of Njombe and Makete, and the local communities living adjacent the Game Reserve.
Starting in 2003 eleven VSLA groups were established in communities surrounding the perimeters of
Mpanga/Kipengere Game Reserve in Njombe and Rujewa Districts. Additionally, nine were established
as part of the general Greater Ruaha GRCC Programme, in Mbarali District. These latter groups were
not connected to a protected area.
In July 2006, the funding for the WWF GRCC project changed from WWF UK to the EC. WWF
established a basin wide approach concentrating on water use and water issues. Direct support to the
Mpanga/Kipengere Game Reserve has ceased, and there is no longer budget for a microfinance
component. Support to the village savings and loan associations has also ceased.
3.4 Rufiji, Mafia and Kilwa Seascape, Tanzania

Mafia Island Marine Park (MIMP) is situated just off the Tanzania mainland coast south-east of Dar es
Salaam in Tanzania, about 20 km east of the Rufiji delta. The park was established in 1995 and is a
large, multiple-use area being operated on the principles of integrated coastal management.
In 2005, a new five year programme was initiated, aimed to facilitate the development of coastal
livelihoods through the sustainable management of marine and coastal resources in the three coastal
Districts of Rufiji, Mafia and Kilwa. This was the Rufiji, Mafia and Kilwa Seascape Programme known,
and referred to within this report, as RUMAKI.
The programme is implemented by the WWF Tanzania Programme Office, in partnership with the
Ministry of Natural Resources and Tourism’s (MNRT) Fisheries Division, the National Environment
Management Council (NEMC), the District authorities in Rufiji, Mafia and Kilwa Districts, the Mafia Island
Marine Park, and the coastal communities within the three Districts.
The goal of the RUMAKI Seascape programme is: ‘Improved socio-economic well-being of coastal Rufiji,
Mafia and Kilwa communities through sustainable, participatory and equitable utilisation and protection of
their marine and coastal resources.’ The implementation of the programme is influenced by the long
term conservation efforts at Mafia Island Marine Park, and the negative perceptions of these efforts by
many residents, especially fishermen in the area.
One aspect of the programme is to support the development of new small scale enterprises through
improved access to financial services, especially access to credit. Lack of access to credit was widely
identified by communities during the RUMAKI planning process as one of the main constraints to
livelihood development. Microfinance projects were established in 2006 in both Kilwa and Mafia,
facilitated by RUMAKI staff and a microfinance consultant, and these formed the focus of the review. In
the establishment of the microfinance component, conservation objectives were deliberately not included
due to the negative perceptions of the Mafia Marine Park and WWF’s role in its establishment and
operation.
3.5 Kayas Kinondo, Muhaka and Gogoni, Kenya

The Mijikenda Kaya Forests are 47 sacred groves scattered along the Kenyan Coast. Of significant
cultural and spiritual value for the Mijikenda people, they also contain important biodiversity values. A
twenty-year collaboration between local communities, biologists and conservation organisations resulted
with the Kaya forests being inscripted on the World Heritage List in 2008. Kayas Kinondo, Muhaka and
Gogoni are located in Kwale District south of the city of Mombasa.
In October 2003 a microfinance institution was established with the objective of being accessible to all
the communities of Muhaka and Gogoni Kayas. This institution uses the Financial Services Association
(FSA) model. The unit of this FSA based in Kaya Kinondo is often referred to as the ‘Kaya Kinondo
Village Bank’. The bank is a secondary project of the ‘ecotourism’ project which has set up a tourist
11
visitor’s centre at Kaya Kinondo. At the outset it aimed to work in partnership with the ecotourism project
though this has not in fact occurred. The ecotourism project was aimed exclusively at Kaya Kinondo
rather than the wider area of the FSA and concentrates on the Kinondo neighbouring villages of Chale,
Mgwani and Kibarani.
Kaya Kinondo and Kaya Muhaka are protected areas gazetted as national monuments due to their
cultural importance.
Image 3. Kaya Kinondo Financial Services Association. Photo R. Wild
3.6 Lake Bogoria National Reserve, Kenya

Lake Bogoria is a Rift Valley soda lake located in south Central Kenya in the Rift Valley Province, of
Kenya. Famed like other Rift Valley lakes for its populations of Lesser and Greater Flamingos is it
protected within the Lake Bogoria National Reserve which straddles the border of the Baringo and
Koibatek Districts, and is jointly managed by the District. The National Reserve was designated in 1974
and in 2001 it was listed as a wetland of international importance under the Ramsar Convention. The
reserve is at risk from unsustainable resource exploitation within the Lake’s water catchment area.
Between 2000 and 2005 WWF implemented the Lake Community Based Wetlands Project (LCBWP).
One of the objectives of the project was to improve the livelihood of the local community through
sustainable natural resources management. To achieve this objective, the project undertook a wide
range of activities such as dryland farming, livestock breed improvement, tsetse fly and tick control,
community training and support to income generating activities, among others. Microfinance was later
identified as an important tool.
In January 2003 the Project commissioned K-Rep Development Agency (KDA), to undertake a Rapid
Financial Appraisal (RFA). K-Rep Development Agency is a grant funded organisation that aims to
undertake research and to develop methodologies for reaching clients who do not have access to
financial services. The results of the Rapid Financial Appraisal indicated that the communities targeted
had a demand for financial services and it was viable to establish a Financial Services Association (FSA)
in the area. As a result, two separate FSA’s were established in March 2005, three months before the
end of this particular phase of the Lake Community Based Wetlands Conservation Project.
12
Image 4. Lake Bogoria and Flamingos. Photo J. Robinson
4. Microfinance models
The following is a brief description of the microfinance models which formed part of the review. Figure 2.
Presents a generalised and simplified hierarchy of financial institutions. Of importance is the distinction
between formal, legally recognised and often taxed MFIs (e.g. FSA) and informal, legally unrecognised,
unregulated or untaxed MFIs (e.g. VSLA).
Village Savings and Loans Associations.

Found only in Tanzania, Village Savings and Loan Associations (VSLA) are based on the MMD
methodology originally developed by CARE Norway in Niger, and subsequently applied in several
countries in Sub-Saharan Africa. MMD is derived from Masa Masa Dabaru which roughly translates as
‘women on the move’, and the original model had a strong emphasis on women’s empowerment. The
MMD methodology is the basis for the VSLA model and subsequently the Village Community Bank
(VICOBA) and Conservation Community Bank (COCOBA) variants used in Tanzania. The methodology
was also refined based on CARE Tanzania experience in the Jozani-Chwaka Bay Conservation Project
in Zanzibar and WWFs experience of promoting Savings and Credit Societies (SACCOS) on Mafia
Island. The basic principles of VSLA are explained below. For more details see Allen (2006) and Allen &
Staehle (2008).
VSLAs are informal voluntary groups consisting of 30 individuals, established for the purpose of
mobilizing savings for lending back to group members. The members are normally mixed gender, and
they should reside in the same village. The associations are built on the principle of pooled individual
savings as the foundation for building capital with the motivation to save coming from the groups. The
groups then finance member’s income generating activities through loans from the general fund.
13
General description Review examples
Formal Bank Little access in most project

Unavailable for lower economic sites
groups
Formal
MFI FSA
sector –
Microfinance Institution Financial Services Association
regulated
Function best in urban situations and taxed
ASCA Informal
Accumulating Savings and Credit VSL sector –
Associations Village savings and loans model unregulated
Build on ROSCA principles and not
effective un rural areas taxed
ROSCA
Rotating Savings and Credit Merry-go-rounds
Associations Upatu
Commonly occur in many rural and
urban areas
Figure 2. Generalised and simplified hierarchy of financial institutions
The VSLAs elect members to the posts of chairperson, secretary, treasurer, key keepers and cashiers.
Each post is subject for re-election after every business activity cycle which runs between 12 and 18
months. The groups maintain the following records: a register of minutes, register of accounts,
membership register, loan register and attendance register. At the close of the business cycle accounts
are audited by the members and shares are refunded and dividends paid from the profit gained through
lending to members. After closing their accounts, the business cycle starts afresh with a new period of
savings and the purchase of shares.
Meetings for buying shares and eventually distributing loans are held on a weekly or bi-weekly basis as
decided by the members. Members have the option of buying between 1 and 3 shares at a price decided
by the members at the beginning of the cycle. In addition to buying of shares or contributing to the group
fund, members of the banks are required to contribute to smaller educational, health and, in some cases,
environmental funds. Members may then apply to take an interest free loan from the aforementioned
‘social and environmental funds’.
Loans, on which interest is to be paid, are offered to finance an income generating activity. The model
also requires members to form groups of five which are charged with the responsibility of loan appraisal
and guarantee through joint liability. All borrowers are required to pay an insurance against their loan at a
rate determined by the members which is usually between 5 and 10%. Groups often operate savings
accounts with a local bank and some group funds are, therefore, kept in a formal bank, although this is
not a requirement of the model.
Groups promote a savings habit or ethic amongst members, train them in financial management and
literacy, as well as establish social funds as a mechanism for micro insurance for health and education
needs. Some groups, as mentioned, also established environment funds for individual or group
environmental projects.
14
Image 5. Mzee Juma Musa Juma, Treasurer of VSLA with cash box, Unguja Ukuu Village, Zanzibar,
Tanzania. This is the VSLA ‘infrastructure’, more elaborate structures are not necessary. Photo R. Wild
The Financial Services Association (FSA) model

Found in Kenya only, The Financial Services Association (FSA) model (Jazayeri, 2000) involves the
mobilisation of local financial resources in the form of equity capital in order to establish a locally owned
and managed financial institution. The organisational structure of the FSA and its operating principles
allows for the separation of ownership and management. The shareholders appoint board members,
while the board appoints a manager and a cashier. The FSA’s core activities include a) the provision of
micro loans with the interest going to its shareholders and b) savings deposits (for safe custody only and
not available for lending). Other potential products and services include money transfer and micro
insurance. FSAs use available local knowledge and information about its shareholders, who are at the
same time the sole clients, for loan appraisal and recovery.
The shares sold by the FSA are assumed to be negotiable instruments; they can be sold or transferred
without the permission of FSA. Although this could be seen as a strength to the FSA model, on the
ground this has proved otherwise, people in rural areas find it difficult to trade the shares, and hence opt
for savings with informal institutions such as ROSCAs and formal institutions such as banks or SACCOS.
Loans for FSAs come from FSAs capital consisting of the equity raised from the sale of shares and
retained earnings. A shareholder is allowed to borrow three to five times her/his share value depending
on the policy of a particular FSA. Borrowing against shares provides an operational constraint because
the shares are not easily transferable. FSAs use a combination of physical collateral (landed property
and chattels-bicycles, furniture) and solidarity groups for peer pressure.
Investors in the FSA expect return on their investments on top of being the sole users of the financial
services offered by FSAs. The FSA are required to hold annual audits to determine the net profit and to
determine the percentage of dividend payment and determine the new share price. The new share price,
after dividend, is determined by taking 90% of the book value and dividing the capital and retained
earnings by the number of existing shares.
Box 1. A Ready Made VSL at Kaya Muhaka, Kenya

15
In Kaya Muhaka, a conservation group of 40 people had been established and met weekly to discuss
conservation and development activities, as well as to contribute to a ‘Merry Go Round’ (ROSCA) saving
group. While only four individuals within the group had personal FSA accounts, the group did hold an
account with the FSA. The per head weekly ROSCA contribution was relatively small and ten percent of
the total collected went into the group’s FSA account. There was no easy mechanism, however, for this
money to reach the FSA and the group treasurer had been known to keep up to ten weeks worth of
payments at a time before making a deposit. The group had not defined the purpose to which group
monies could be used.
In spite of the group’s links to the FSA, the establishment of a ROSCA indicated a need for a lower level
group format saving service. Members of the conservation group were, however, unaware of many of
the FSA services despite having both a group account and also a board member within their group.
Group members, particularly those living further away from the FSA office, felt that the savings
programme did not adequately stimulate economic activity and savings in support of their livelihoods.
One way to build upon such informal savings groups would be to develop a series of VSL associations
that connect to and underpin the FSA.
Ideally, the FSA is expected to take a legal form that allows mobilizing and allocating of shares among its
subscribers. Different countries which have promoted the FSA have registered FSAs in different legal
forms. In Kenya, for example, they are registered under the Ministry of Social Development and Gender
as associations, legal entities that do not require members to be shareholders but just members with
entry fees and annual subscription.
Key assumptions of the model
When establishing a FSA the review team recognised that the following assumptions are made for the
FSA is to be a success:
• Shares or equity with a potential return would be attractive as local financial investments;
• That the funds mobilized through the sale of shares will be sufficient to meet credit needs;
• Human resources are available from within the community to form a management team and the
Board of Directors, and management and board, require only short term training;
• That due to local ownership and social ties there would sufficient social capital in the form of
mutual obligations, trust and cooperation among the FSA members will minimize delinquency
and costs;
• Borrowers will repay their loans because of peer pressure;
• Linkage with other financial institutions is not needed at the initial stage since local money raised
in the form of shares is repeatedly recycled as loans.
Savings and Credit Cooperative Societies (SACCOS)

Savings and Credit Cooperative Societies (SACCOS), found only in Tanzania, are financial services
cooperatives registered under the Tanzanian 2003 Cooperative Act. The Annual General Meeting (AGM)
of members is the supreme body. The AGM elects a Board consisting of a Management Committee,
Credit Committee and Supervisory Committee. SACCOS have paid staff which range from Managers to
Clerks depending on the size of the SACCOS. Supervision is the responsibility of the Registrar of
Cooperatives who operates through Departments in Local Government Councils (District, City, Town and
Municipal councils). The minimum membership for SACCOS is 10 members but there is no ceiling.
Members buy shares and there are to set rules on regular savings and meetings.
The next sections discuss the detailed findings of each model at each site and follows with overall
findings and recommendations.
16
Image 6. Olkoshika FSA, Lake Bogoria. Photo R. Wild
5. Discussion
The different models performed very differently across the three main criteria of review. One model, the
Village Savings and Loans Associations (VSLA), stood out in its performance across all three
sustainability criteria; that is financial, social and environmental. The VSLA performance on the
environmental criteria was not as good as for financial and social criteria, but design improvements can
be made and some are recommended. Environmental performance is to quite an extent dependent on
the other two criteria, as well as outside factors. All three factors are, however, linked. The discussion
focuses on environmental sustainability as this is the focus of the review, bringing in the other elements
as appropriate.
All the other three models had limitations and had either been wound up (Grameen Bank model at
Jozani), were being considered for conversion to VSLA (SACCOS in Mafia) or performing poorly (FSA,
Kenya). Of concern was the FSA model at Lake Bogoria which is in need of a review, redesign and
increased support while the FSA model at Kaya Kinondo is to some extent holding its own but is not
really delivering effectively on the three criteria. It will need some redesign and an increase in outreach
to become fully effective.
5.1 Environmental sustainability

In terms of environmental sustainability, which is the main focus of the study, the VSLA model was the
only one that performed against environmental criteria, and thus the following discussion focuses on this
model. The analysis of environmental sustainability for this microfinance scheme takes place at
individual, household, association and community levels.
17
5.1.1 Individual business level

The VSLA model provides a number of opportunities to improve environmental sustainability of individual
businesses. The main mechanism used was the setting of prohibitions against the most unsustainable
activities. Two other mechanisms are suggested here that could be used to improve environmental
sustainability but were not used at any of the sites. Environmental sustainability is often not a clear cut
issue and the way that any individual business is operated affects its environmental impact and hence
sustainability. Thus, the outright prohibitions (disengagement) used by some associations may be
necessary, but could be less ideal in the long run than a more subtle approach that engages business to
take steps towards enterprise environmental sustainability. This, however, does heavily depend on an
appropriate policy environment, for example for sustainable charcoal production.
Resources use and environmental regulations

At several of the VSLA sites reviewed here, the groups have set rules and regulations as to which type of
income generating activities members should be involved in, and which ones are environmentally
unsustainable. In some cases the proponents of the schemes made decisions as to which activities
should be prohibited. These prohibitions were then included in the constitutional documents of the
groups. In Zanzibar, for example, charcoal production and wood cutting for sale was prohibited for group
members. This applied a pressure to reduce resource use. Due to the high pressure for fuel wood in
Southern Unguja, and the limited array of alternative business activities, this approach was only partially
effective. Charcoal making is a complex issue with a number of relevant perverse policy incentives. A
similar approach to prohibiting some business activities from groups was also taken in Ruvu and Ruaha.
At Jozani, wild date palm (Phoenix reclinata) fronds are woven into strips (locally called Ukili in Zanzibar)
and made into basketry of all kinds. Improvements in both the quality of the basketry and in marketing
(locally at the National Park visitor centre and for international export to Europe and USA) of these have
meant that this is a lucrative business for women’s groups (including many VSLA members). Harvesting
of palm fronds is allowed from within the park, but demand outstrips supply and raw material is now also
being purchased from the mainland. Park staff did register some concerns about both the sustainability
of resources use and the manner of its implementation. Women resource users were supposed to report
to the Park Headquarters before going to harvest but this was not being done. Given the distances
involved this requirement is unrealistic (as is often the case with resources harvesting protocols). With
the advent of widespread mobile/cell phone use the park staff suggested an alternative that they could
be informed by text message by conservation committee staff, but this protocol has not yet been
established.
Peer assessments of the environmental impact of businesses

Peer assessments, and the following enterprise screening mechanism, promote the environmental
sustainability of businesses. VSLAs currently provide a mechanism to assess and improve on the
business soundness of the enterprises supported. Each member presents his or her business idea to
other group members and the training officers who give feedback. This mechanism could be used to add
additional environmental criteria and environmental sustainability could be peer assessed by the group.
The responsibility to take the lead in this activity could be undertaken by a committee member with a
specific environmental responsibility, who could be provided with training to support this.
Generic enterprise environmental screening

As a support to the group peer assessments elaborated above, a generic environmental screening
approach can be taken which broadly classifies enterprises as environmentally positive, neutral or
negative. A generic screening can be carried out as a programme research activity and VSLA groups
advised and trained accordingly by support apex organisations or project staff. This kind of screening did
not, however, take place at any of the sites in this study. This would be seen as an initial screening
process and more detailed steps might be needed to bring some enterprises into sustainability.
Ultimately, judicious government regulation and appropriate policy may be needed for some enterprises.
5.1.2 Household level

At the household level, saving allows households more options when they are trying to meet the financial
demands upon them.
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Choice and options

The resources mobilised by the VSLA methods provide some choice. Some VSLA members received an
amount of money they never dreamed possible previously; they then had options to use this in different
ways. Providing alternative choices was one of the original ideas behind the establishment of a savings
and loan scheme at Jozani in the first place. At that time the use of forest products (often illegally) was
being used extensively to support cash generation. This, at least in part, was to provide the cash for
education and health and celebrations such as Maulid and Idd el Fitr. It is now reported that the VSLAs
at Jozani provide much of the alternative options for cash sources for periodic or emergency household
needs and annual events. One component of the VSLA model that supports household choices is the
social fund which provides micro insurance.
5.1.3 Association level
Peer pressure
When accessing credit through a solidarity group other members of the community immediately have an
interest in a member’s proposed business. As described under individual businesses (section 5.1.1),
each business proposal is presented to the whole group of thirty members, and other members of the
group of five are liable for default on repayments and therefore have an even keener interest. Some
VSLA groups prohibited environmentally damaging businesses (e.g. unsustainable charcoal production
or fishing with small mesh sized nets [see Section 5.1.1]), which have a detrimental effect on the village.
Peer pressure then adds to the peer assessment to provide an impetus for people to select
environmentally neutral or beneficial business.
Environmental education
Many respondents emphasised the need and importance of environmental education. This was seen as
one of the more important protected area activities, it support not only microfinance but overall
environmental governance. Some of the programmes had used the savings associations as a venue for
holding environmental education sessions, and VSL groups are ideal for extension delivery of all kinds.
Environmental education also formed part of the business assessments.
Training
According to the respondents, business training in the VSLA model was appreciated and well received.
Currently the VSLAs get some training on environmental issues and alternative IGAs, however, this is
not present in the FSA, even at a board level.
Once an association has graduated it is free to make its own rules and regulations regarding members’
behaviour, and it has relatively little contact with support agencies. Thus, the establishment and training
stage is critical for promoting environmental governance.
Symbolic and ethical environmental links

Many VSLAs use songs, chants or slogans to start their regular meetings. These slogans often establish
ethical and symbolic links with key features of the local environment, educate about certain ecosystem
links and express principles of good management of the environment. In some cases (for example at
the Mahale Mountains National Park) the chant is printed inside the members pass book. The purpose
of these is to reinforce the links to the environment and often reminds group members why the funds
have been secured to support their business activities.
Performances
In some cases groups perform drama and dance at environmental events. (e.g. in Greater Ruaha
catchment one VSLA COCOBA drama group performed at a World Environment Day event [see Image
7]). These performances communicate, educate and reinforce the message of sustainable
environmental management.
19
Image 7. COCOBA VSLA Drama Group at World Environment Day Celebrations, Mpanga/Kipengere
Game Reserve, Ruaha, Tanzania. Photo J. Robinson
20
5.1.4 Apex level
Training and trainers & apex organisations

The review team found that the village trainers in Ruaha were still being effective, albeit partially, after
WWF had stopped paying them allowances for their work. The trainers had established relationships with
VSLAs despite not being part of an apex organisation and were found to be actively participating in the
activities of the groups.
The long-term interest of every implementing agency in promoting VSLAs is that each group should
survive and that other groups should form. WWF, due to a shift to a new phase of the programme, had
stopped promoting VSLAs in Ruaha. Due to the relatively high (at least at household level) cost of
training members of new groups, they have managed to create only one or two new VSLAs. There is
likely to be minimal new group formation and is thus not likely to create any long-term or visible impact.
At Jozani, in contrast, a Local NGO, JOCDO formed to implement the scheme remains an ongoing and
active force after donor support was withdrawn. 48 groups had been formed at the end of the CARE
input in 2004. As of the 2007 field work, the number of groups stands at 200 and extends well beyond
the Jozani immediate area. This is 152 new groups in three years representing about 4,500 households,
most of which will be operating new businesses, accumulating savings and taking loans. This translates
into a significant new level of economic activities. One of the reasons why Jozani was selected for a
DFID funded study (Anyango et al. 2006) was to learn the lessons once project support ended.
5.1.5 Programme level
Coordinated implementation of the conservation and microfinance components

Co-ordinated implementation of both microfinance and environmental conservation components of
projects is one of the important lessons of the review. There is a tendency for the microfinance
component of conservation projects to be, or become, implemented separately and to lose synergy and
even create conflict. It is very important to ensure that a microfinance component is very well integrated
with other development and conservation components, for maximum effect. This integration does not
mean, however, that conservation linkages always need to be writ large e.g. RUMAKI programme.
Where livelihood support and trust building was the main objective of the microfinance component, there
was a deliberate effort to separate these two activities. Where these components were planned to be
implemented in concert, a split between the two components has occurred at Jozani, Kaya Kinondo, and
Ruvu, the latter causing some institutional conflicts, although these were later, at least partially,
remedied.
Trust building
Conflicts are not uncommon around natural resources use and management. Traditional protected
areas have often been established under situations of conflict. Effective microfinance can be a very
successful entry point for any project. CARE Tanzania now uses the VSLA approach for the entry point
for any project whether it be health, education or water and sanitation.
The conservation situation now at Jozani is considered at least somewhat stable. The relationship
between the National Park and Jozani communities overall is good, the core area of the park is ‘95%’
protected 1. VSLA members rate the microfinance intervention the highest of the many community
conservation activities that have been implemented, while the few non-member groups spoken to rated it
second after environmental education, due to the support that groups have given the community as a
whole.
The RUMAKI programme in fact deliberately aimed not to link the VSLA programme to a marine
management component due to the sensitive politics in the project area. The VSLA were named Village
Community Banks (VICOBA) and not Community Conservation Banks 2 (COCOBA) for this reason. Their
strategic value was to (i) have a significant livelihood impact and therefore (ii) generate confidence and
goodwill towards the programme, providing an entry point for separate fisheries management initiatives.
This is a strategy which appears to have some success.
1
Pers. com. Ali Mwyinyi, Jozani Chwaka Bay National Park Manager
2
The difference between these two is primarily in the name, with the CCOCBA aiming to reinforce the
conservation links and the model remains the basic VSL in both cases.
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Mechanisms for linking microfinance to environmental sustainability

To be fully effective as an environmental intervention, however, microfinance needs to be part of a suite
of related activities that operate in concert. Its effectiveness as a stand alone ‘conservation action’ is
likely to be at best limited. The other suite of activities will be site specific but may include some of the
following:
• Enabling policy development;
• Institutional capacity building (at community, government and civil society levels);
• Environmental education;
• Common property resource management;
• Enterprise development;
• Judicious resource protection;
• Development and conservation education;
• Cost and benefit sharing.
Support to extension services

The VLSA groups are actually quite useful for supporting government or NGO extension services.
Training is a strong element of the model with most training focusing on financial management and
business skills. The weekly or bi-weekly meetings also provide a venue for training and extension on
environmental management issues. Once the groups have become established, the pattern of their
meetings is known. This greatly assists extension planning as field staff know the regular times that
groups meet and can plan their visit schedules around these, with greatly reduced transaction costs in
setting up meetings. These can also be used for other sectoral extension programmes.
Links to institutional environmental governance

As part of this study, it was hypothesised that one mechanism by which microfinance could have an
impact on environmental governance would be if the strong positive governance, social cohesion and
collective action of the groups exerted an influence over village level governance. Incidents have been
reported in Malawi where women empowered by membership of a VSLA association have stood up to
the traditional chiefs (J.Ulimwengu, pers.com.). It might be that similar effect may be seen in
environmental governance.
No effects of this nature were noted during this study. Quite a number of VSLA members were also
members of the village conservation committees or equivalent. But no direct effect on the standard of
environmental governance was reported by the members during discussions.
For this effect to manifest a number of conditions may be necessary;
• Communities where a high percentage of households are members of VSLAs;
• Where there are formal links to village governance structures.
Jozani-Chwaka Bay National Park was the only site where the VSLAs were mature enough to be able to
indicate this effect. Data was, however, not available regarding the percentage households per village
(Shehia). Estimates from two villages Charawe (c.50%) and Pete (<15%) did not confirm any pattern,
and this data would be worth further study, despite the fact that Charawe has long be known as a village
of high environmental management.
Enhancing the VSLA model design elements could improve the chances of the groups influencing village
environmental governance. Firstly, there could be formal representation of the VSLAs, probably
collectively, on village environment committees. Secondly, each VSLA could nominate a post holder
responsible for environmental concern to strengthen conscious thinking about environmental governance
within the groups. This individual could receive training on environmental screening of individual
businesses, act as a point person for environmental issues and may have an influence on overall
environmental governance at the village level. This would be a useful area for future study, design and
planning.
22
Nature of environmental pressures

It is important to note that the major pressures on the reserves do not always come from the local
inhabitants. Microfinance does not therefore address this issue. The primary driver of unsustainable
charcoal making and wood cutting is inappropriate government policy and urban demand, not local
management. While the microfinance efforts at Jozani and Ruvu had some influence on these activities
at group level, there is a limit to what they can achieve [Image 8].
5.1.6 Negative environmental issues
Ongoing wood cutting activities at Jozani

Despite the overall positive picture at Jozani, there were still reports of ongoing wood cutting going on at
Jozani by VSLA group members. This formed part of the ongoing discussions during the study. It was
not possible to determine the actual level of wood cutting during a short comparative study of this nature.
An informal estimate from one government staff member was that 20% of groups may still be
participating in some way, this figure should be seen as preliminary. The situation is quite difficult to
gauge but the following are relevant points:
• South Unguja continues to be main source of supply of fuel wood for Zanzibar Town which has a
population of approximately 300,000 people;
• Zanzibar and mainland wood trading is very linked, for example, the increasing control of
harvesting in Rufiji delta is increasing prices, and also pressure in S. Unguja;
• The price of charcoal at the time of the survey (June 2007) was actually higher in the Jozani
Area than in Zanzibar town, indicating lower supply in the area;
• Fuel wood and charcoal remain one of the most viable businesses in the area;
• While a significant number of VSL groups are still engaged in wood cutting this is probably lower
than the population as a whole;
• There is a proportion of sustainable charcoal being produced;
• Sustainable firewood and charcoal should be a long-term possibility but will require significant
habitat recovery (there are some indications of recovery) and a revision of policy, including
agricultural policy, to remove perverse incentives towards woodcutting.
23
Image 8. Illegal charcoal harvesting Ruvu South Forest Reserve for Dar es Salam – Microfinance
intervention can have only limited impact on national policy. Photo J. Robinson
24
5.2 Social acceptability

5.2.1 Social capital
Repeatedly participants noted the mutually supportive nature of the VSLA solidarity groups. As
mentioned, for some individuals this was more important than the financial benefits.
Box 2. Enhancing Livelihood and Social Status – Mwaluma Village, Ruaha Tanzania
A striking result of the microfinance schemes were their impact on income diversification and on
increased individual wealth and status within society. A good example of this came from Mwaluma, a
small village located in the Ruaha River basin in central Tanzania.
When Hamisi first joined his local Community Conservation Bank (COCOBA) solidarity group following
the VSL model, he was making a living by buying and selling small finger bananas. Occasionally, when
he could not make ends meet, Hamisi cut firewood from the forest to sell in town. In times of hardship he
resorted to unsustainable behaviour and used the forest as a bank, to meet his immediate cash needs.
After joining the COCOBA and learning how to save with the group, Hamisi was able to open his own
small but successful food stall. He also managed to raise the necessary funds to move into livestock,
where he now fattens cattle before butchering them for profit. Hamisi explained that he had never been
able to save much money before and had therefore not been able to ‘invest big’. When he received his
first loan, it enabled him to do some ‘good small business’, thus gradually building up his business.
Hamisi explained that he has since invested in several areas including livestock. He had many positive
things to say about the microfinance groups, which he described as ‘very important people to me’, as
well as what COCOBA had done specifically for his life. He summed this up simply as:
‘COCOBA has given me the chance to be the man I am today, I now have respect.’
- Hamisi, Mwaluma Village
5.2.2 Social funds

The social funds covering health and education were very much appreciated and ranked highly when
scored. They provide a buffer against emergencies. Often the action audit was deliberately planned to
occur just before a social event or seasonal festival, such as the Islamic festival of Maulid, so members
would have a lump sum to meet social obligations.
5.2.3 Status
As has been mentioned, the successful groups enhanced social status. Often members improved their
housing. Membership also conferred increased credit worthiness enabling members to borrow money
from other sources, for example from other family members who have the confidence that loans will be
repaid.
5.2.4 Early graduation

The length and level of support to microfinance projects is important: they are long-term efforts and too
early ‘graduation’ can leave projects feeling abandoned. This was the case with the Ruaha (WWF) and
Ruvu (CARE) groups. Motivation has been identified as a livelihood ‘flow’. And in this sense follow up,
contact and communication helps maintain the motivation of groups.
5.2.5 Cultural and religious issues

Zanzibar implementers have sought the advice of the Chief Mufti on religious issues related to VSLAs
and particularly regarding interest. The VSLAs were approved on the basis that the interest forms part of
the savings and is ultimately returned to the saver. One member, however, dropped out of a group early
due to religious concerns.
25
5.2.6 Trust breaking

Community memories are long when it comes to making losses from failed microfinance projects, and
there is thus an imperative to providing sufficient inputs for successful projects. At a number of
interviewees at different sites recalled (sometimes bitterly), previous bad experiences with microfinance
initiatives.
5.3 Financial viability

The following are some findings related to financial viability and scheme design.
5.3.1 Scheme implementation
Start up funds
Several of the schemes (Jozani, Ruaha, and RUMAKI) gave grants or loans in the first instance. Grants
were given at Jozani but dropped fairly early. External funding through either a loan or a grant did not,
however, disrupt the concept of savings in the VSLAs. At Ruaha an interest free loan was given to
groups at the end of the training session (after 16 -22 weeks) matching the amount the group had saved
from members’ weekly deposits. In this way, the group’s financial capacity was increased. All groups in
Ruaha refunded their matching loan on time and without problems.
In RUMAKI matching loans were given to all 63 groups and were talked about in positive terms by
recipients and programme implementers and seems to have been an important factor in raising
confidence and morale and enabled groups to start disbursing loans earlier than they would otherwise
have done. In some instances, the start up funds might have created the expectation that new groups
should get the same level of assistance when they form. This may present a hurdle for the implementing
agency to keep providing these start-up funds if they are not available. Experience has shown in a
number of places that projects can effectively start without start-up funds. The advantages or
disadvantages of start-up funding should be further examined.
Image 9. Institutional analysis with a VSL focus group held during the study. Photo J. Robinson
26
Loan repayment system

It is recommended that loan repayment should be in small amounts and on a regular basis, not in a lump
sum final payment. Weekly payments are preferable and should be flexible to meet cash flow
requirements of the borrower.
Loan insurance
It recommended that appropriate assessment should be made to determine the level of risks so as to
have premiums which do not create an extra burden to members of the community. Some of the
insurance rates seem to be set very high which, despite the fact this money remains within the group,
places a burden on individual repayment.
Short Term Loans

One of the limiting factors of the VSLA model in terms of promoting positive environmental impact is the
short term nature of loan provision, i.e. between 3 and 6 months. This prevents longer term investment
towards sustainability in situations where agriculture is the main economic activity. (E.g. Ruaha). Three-
month loans enable participants to make investments and tackle seasonal financial shortfalls that they
may previously have used the protected area or income from other unsustainable sources. There are
plenty of examples outlined above of people bettering their situation and moving away from resource
dependency, however, it was clear from the focus group discussions that there is a limit to the
achievements of the loans when a person is looking for short term profit. Therefore, this becomes an
environmental issue as much as a financial sustainability issue. This highlights the need for a MFI to be
meeting the financial needs of members in order to influence their behaviour. VSLAs have been seen to
remove the pressure from protected areas by addressing seasonality, however, some moves towards
sustainable development may require more investment than a VSLA can offer.
Indicative performance of VSLA and SACCOS

Data derived from RUMAKI allowed a comparative analysis between the SACCOS and VSLA models.
The VSLA model is savings driven, however, available data from VSLAs promoted by WWF in Kilwa,
Mafia and Rufiji indicates that the total loans given actually exceed total savings. By December 31, 2006
(approx. 2 years of operation), data from VSLA promoted and supported by the WWF savings
component of the programme was just over 46.5 Million Tsh (US$ 42,507) but represented only 56% of
the total amount of loans issued, which was over 86 million Tsh (US$ 76,902). It should be borne in mind
that the loans were also funded by some loans from WWF, fines, interest income, gifts and insurance. In
comparing the performance of the VSLA model with that of the SACCOS (Table 3) in the RUMAKI
project it can be seen that a smaller VSLA membership (63%) with smaller capital support (72%) had
saved more (122%) and lent more than double the loan value (229%) in half the time (2 years).
Yrs Total
Model Savings Loans WWF Loans
est members
TSh US$ TSh US$ TSh US$

SACCOS 4 840 38,947,000 34,774 29,815,904 26,621 18,000,000 16,071
VSLA 2 528 47,607,400 42,507 86,130,000 76,902 13,000,000 11,607
% diff. 63% 122% 229% 72%
Table 3. Comparison of the funds mobilised from SACCOS and VSL in RUMAKI
5.3.2 Impact on the poor
Poverty alleviation
Although group membership may not have fully moved members out of poverty, all the VSLA members
interviewed considered themselves to be better off and, in some cases, this has led to the ability to make
27
a choice and move away from a dependence on unsustainable resource use. The poverty alleviation
impact for Zanzibar, one of the more mature schemes, is well documented (Anyango, et al. 2006, 2007).
To better understand the patterns of benefits derived from microfinance, a tracking tool or monitoring
methodology could be useful. Ideally this would be used by the groups themselves as part of their
internal monitoring.
Reaching the Poorest

Despite the positive effects of the VSLAs on the groups’ economy, results from this study support other
work that suggests the schemes do not easily reach the poorest members of the community.
The progression of the groups from one action audit to the next indicates that some members get left
behind and drop out. As the majority of members gain confidence in their businesses and their assets
grow they tend to increase their share sizes. Some members do not rejoin as they cannot meet the
higher share values. Theoretically it may be possible to reform groups with lower share sizes to enable
those that cannot manage a large weekly savings. CARE at Jozani (and elsewhere) has also been
experimenting with a system of tokens to allow smaller daily savings to help towards meeting the weekly
payments. Several changes to the VSLA methodology have been made to encourage the participation
from lower income sectors of a community (Allen and Staehle 2007).
Figure 3 shows the theoretical movements of VSLA membership through a community. The middle or
average wealth groups are those that are most interested in the initial phases. The experience from
Kilwa was that the richest segment of the community only used the VSLAs in the absence of other
options, and that many individuals were members of several savings groups. If other financial facilities
are available the richest members of the society are likely to use these in preference to VSLAs. The
poorest (including the destitute) may never be reached but should benefit from employment opportunities
derived from a more economically active community.
The easiest way to increase the number of groups and membership in a community will be horizontally
within the ‘average’ households, whereas specific provisions may be needed to help the savings groups
to attract the poorer households. At the lowest economic levels within the communities, the positive
effects of increased economic activity are most likely to be seen by employment within the community.
5.3.3 Capacity building and scheme expansion
Scaling up
The VSLA model should include a clear strategy for scaling up its activities, both in terms of outreach
and the level of savings that are mobilised. Much of this would be linked to the design of apex
organisations and forging links as appropriate with other financial institutions.
Retain and strengthen the capacity of field trainers

The village-level recruited field trainers have an important role to play in the development and continued
existence of VSLAs. VSLA’s members appreciate the role played by training in creating an efficiently
functioning financial services system for the poor. The VSLA need trainers and technical support
providers like any other MFI in order to address dropouts and complexity of operation as the number and
size of business transactions increases. The field trainers could also perform an oversight function which
is a necessary element for any financial institution, big or small, formal or informal. A mechanism to keep
ongoing training (by providing a service which is paid for) needs to be part of the exit strategy to achieve
sustainability.
Skills development
Occupational training related to specific businesses should continue to be provided through the support
of WWF or other projects operating in the project location.
28
Image 10. Kaya Elders at Kaya Kinondo Sacred Forest & World Heritage Site. Photo R. Wild
29
Link VSLA with other schemes.

Since project delivered actions are for a fixed duration, a question arises about how the VSLAs can
survive beyond project cycles. The problem of the project cycle manifested itself often during the study.
One way to achieve this is to promote links to other schemes/projects or MFIs to keep necessary support
and funding in place. That is to build up a private sector support system.
Underpinning FSA with VSLA

The VSLA model has proved more successful, therefore there is potential to introduce the VSLA model
in support of the FSA to enhance its membership. The FSA could then perform the role of a link bank,
potentially providing credit for the VSLAs in the long-term and possibly overcoming restrictions of growth
as seen in Zanzibar and Ruvu.
Box 4. Enhancing Group Activities – Kilwa Masoko Town, Kilwa District
There were several instances, including in Ruaha, Zanzibar, Kilwa and Mafia, of VSL groups pooling
their individual contributions towards group activities and investments.
A particular VICOBA group in Kilwa Masoko was remarkable, as it was already providing a basis for
group investments, despite having been established for less than 9 months. The VICOBA members
had used part of the group’s ‘interest free conservation sub-fund’ to create a nursery. They had planted
trees as well as vegetable crops, working in the nursery when they had free time. This particular group
clearly demonstrated how rapidly members can feel solidarity within their groups.
One participant, Eshe, spoke of how quickly the group had established strong links amongst members.
She described how she felt like the group was like a new family to her and how she was very excited
about the group fund. Eshe felt that the fund had the potential to help her ‘do more than she would be
able to do by herself’.
A second microfinance group in the same area, that had also been established for a period of less than
one year, were actively engaged in procuring a parcel of communal land for joint economic activities.
The fact that each of these groups were already willing to invest together, despite their short
establishment, indicated that bonds can quickly be cemented within the aptly named ‘solidarity groups’
thus enhancing the potential for group activities and investments.
30
Figure 3. Diagram VSLA reach within households of different wealth rank with community
Circle representing village community
Rich households only interested

RICH HH
if no alternatives
VSLA Better off and early adopting

members households
AVERAGE
HH
Conditions needed to expand

across and down through
households
Conditions needed for VSLA to

POOR reach poorer households
HH
DESTITUTE Destitute more likely to gain by

HH intra community employment
than join VSLA
31
5.4 Other considerations

5.4.1 Effects of population density
Project Region Pop Density

Tanzania
Jozani Southern Unguja 111
Ruvu South Coast 27
Ruaha River Catchment Mbeya 34
Kilwa Masoko Lindi 12.6
Mafia Coast 27
Kenya
Bogoria Rift Valley 13
Kinondo Kwale 54
Table 4. Regional Population densities where projects are operational
The effects of population density are quite influential on the success of microfinance
initiatives. Up until now it has been recognised that microfinance has performed better under
urban and high rural population densities. Population densities derived from regional
averages are presented in Table 3. These will not be representative of some sites. The town
of Kilwa Masoko, for example, is not typical of the population density of the generally sparsely
populated Lindi Region. The VSLA model does, however, function in quite low population
densities.
5.4.2 A possible model for integrating social, financial and

environmental assets and flows
A model is proposed here which aims show how financial, social and environmental assets
interact. The Figures 4 a and b, can be considered at the either the household, solidarity
group or community level. Its premise is that financial, social and environmental capital is
mutually supportive.
Fig 4b
Fig 4a
Figure 4. Microfinance as a tool of sustainable development; the potential risk if microfinance

ignores environmental issues
32
The cycle in the middle represents the way the microfinance methodology links the flows of
these capitals into the household or group economy supported by a microfinance solidarity
group. When working ideally (Fig 4a) as the flows of each provide goods and services and at
the same time the size of the triangles do not decrease but ideally increases. When
environmental capital is not protected (fig 4b) and this triangle starts to diminish, the other two
capitals will eventually diminish also. The loss of environmental capital can be the result of a
number of causes including poor governance, increased population pressure, inequitable
utilisation, locking up in ‘predatory’ protected areas and so on.
By enhancing all three areas, development can be sustainable as these areas will rely on
each other. The result is a virtuous cycle of increasing environmental, social and financial
assets. If the environmental capital is ignored or undermined and diminishes, as the smaller
arrow in Figure 4b shows, then assets can also diminish or leave the household/group/village
(as demonstrated by the thick arrow at the bottom). This may lead in time to the financial and
social assets also diminishing. This was seen in Ruvu where the majority of marketable CPR
goods had been harvested by people from outside the community; this undermined the
capacity of the current inhabitants who found the environment a constraint to pursuing IGAs.
The smaller arrows pointing in and out of the circle (household or group) represent flows in
and out of the unit. They could represent exploitation trade or the growth or decline of a
natural asset (growing or harvesting trees, improving or diminishing soil fertility, etc).
Figure 5. Microfinance as a tool of sustainable poverty reduction and development within a

protected area context
Figure 5 uses the same concepts as figures 4 a & b, but incorporates a protected area, as
seen in most of the groups that were part of the review. The protected area affects the
availability of environmental assets to communities or households. This relationship can be
positive or negative – either by a) building up natural capital and enhancing the flow of
environmental goods and services or by b) locking up resources, disempowering communities
to deal with crop-raiding animals, excluding them from the benefits of the protected area
income, etc. Note in this model we have shown arrows flowing directly to environmental
capital, but an argument can be made that direct flows can go to and from financial and social
capital.
33
As noted earlier microfinance is not effective in improving environmental governance as a

stand alone intervention in the absence of other conservation activites. This model could be
expanded to include other assets usually included in livelihood asset frameworks.
6. Conclusions and recommendations
The review of microfinance programmes implemented at six sites in Tanzania and Kenya
have demonstrated the importance in programme design in delivering benefits across
financial, social and environmental criteria. Main observations include:
1. Of the models reviewed, the VSLA model performed the best and would appear to be
the best suited to enhancing financial, social and environmental sustainability in many
rural and conservation situations.
2. Further design improvements can be considered to improve performance, especially
of environmental sustainability, but also financial and social components.
3. To be fully effective the FSA model will need review, adjusting and increased support.
This is particularly true at Bogoria, and the project is putting such measures in hand.
4. The initial training input in establishing microfinance projects is very important and
should not be compromised.
5. The role of start up revolving loans for group formation needs further examination.
6. Implementing agencies should aim to put in place long-term support mechanism for
microfinance activities.
Box 3. Encouraging collective action and innovation
At Kaya Muhaka, Kwale District, Kenaya the rotating savings and credit association (ROSCA)
model was also used for communal group work. This kind of communal work is common in
many societies and helps the group members achieve more that they would individually.
A group had established a tree nursery to sell a certain percentage of the seedlings and
aimed to plant the remainder on one individual’s property, the following year they would plant
the next member’s woodlot and so on, thus promoting increases in tree coverage and access
to wood resources year on year.
Linking communal action with the group savings model allows collective action to be backed
by financial empowerment.
7. References
Allen, H. (2006) ‘Village Savings and Loan Associations: Sustainable and cost effective rural
finance, Small Enterprise Development 17(1): 61–68.
Allen and Staehele (2007). Village Savings and Loan Associations (VSLAs). Programme
Guide Field Operations Manual. Version 2.92.
Allen, H. and Staehle, M. 2008. Village Savings and Loan Associations: A Practical Guide,
Practical Action , 2008. 94 pp. ISBN: 9781853396656, ISBN-10: 1853396656
34
Anyango, E. Espisu ,E. Opoku, L. Jonson, S. Malkamaki, M. Musoke, C. (2007). “Village

Savings and Loan Associations– experience from Zanzibar” Small Enterprise Development
Vol.18 No.1.
Anyango, E. Espisu ,E. Opoku, L. Jonson, S. Malkamaki, M. Musoke, C. (2006). “Village

Savings and Loan Associations– experience from Zanzibar” Decentralised Financial
Services.
Jazayeri, A. (2000). Financial Service Associations (FSA) Concept and Some Lessons
Learnt. Available at http:// www.microfinancegateway.org
Millinga, A. (2007). “An Appraisal of the financial performance of Four WWF Projects in Kenya
and Tanzania” Draft Report, LTS International.
Robinson, J. (2007). “A Study of Rural Microfinance and its Links With Encouraging
Sustainable Natural Resource Use Surrounding Protected Areas in East Africa”, Prepared for
the degree of Master of Science, University of Edinburgh.
35
8. Bibliography
Anderson, C.L., Locker, L. and Nugent, R. 2002. Microcredit, social capital, and common
pool resources, World Development 30(1), 95–105.
Ángel, J. 2004. Sustainable Microenterprise Development Published by: Washington, US:

Agros International.
Buckley, G. (1997) Microfinance in Africa: Is it Either the Problem or the

Solution? World Development, Vol.25,No.7,pp. 1081-1093.
Githitho, A. (2003). The Sacred Mijikenda Kaya Forests of Coastal Kenya and Biodiversity
Conservation. From The Importance of Sacred Natural Sites for Biodiversity Conservation.
UNESCO (2003)
Grant, W. J. and Allen, H. (2002) ‘CARE's Mata Masu Dubara (Women on the Move) program
in Niger: Successful financial intermediation in the rural Sahel',
Journal of Microfinance 4(2): 189–216.
Global Development Research Centre.. [Online] The Environmental Colors of Microfinance.

Accessed 22/08/07. Available at: http://www.gdrc.org/icm/environ/environ.html
Gugerty, Mary Kay. 2006. “Rosca Design, Social Sanctions and Default: Evidence
from Kenya.” Working paper, Daniel J. Evans School of Public Affairs, University
of Washington.
Gugerty, M. K. (2007). "You can't save alone: Commitment in rotating savings and credit
associations in Kenya." Economic Development and Cultural Change 55(2): 251-282.
Hall, J.H. Lal, A and Israel, E. (2006).How MFIs and their Clients can have a Positive Impact
on the Environment.
Johnson, S. and B. Rogaly (1997) Microfinance and Poverty Reduction. Oxford: Oxfam.
Johnson, S., Mule, N., Hickson, R., and Mwangi, W. (2002) ‘The managed ASCA model:
innovation in Kenya’s microfinance industry’, Small Enterprise Development 13(2): 56–66.
Kashuliza, A. K. (1993). "Perception and Role of Informal Rural Finance in Developing-

Countries - the Example of Tanzania." Journal of Rural Studies 9(2): 163-173.
Kimuyu, P. K. (1999). "Rotating saving and credit associations in rural East Africa." World
Development 27(7): 1299-1308.
Premchander, S. 2003. NGOs and local MFIs-how to increase poverty reduction through
women’s small and micro-enterprise. Futures 35:361-378.
36

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SUMMARY REPORT

Microfinance and environmental

Robert Wild, Altemius Millinga and James Robinson

1. EXECUTIVE SUMMARY ...............................................................................................................................1

1.1 MAIN FINDINGS ...........................................................................................................................................1

2. BACKGROUND TO THE REVIEW ..............................................................................................................5

3. SITE DESCRIPTIONS .....................................................................................................................................7

3.1 JOZANI-CHWAKA BAY NATIONAL PARK, ZANZIBAR, TANZANIA ..............................................................10

5.1 ENVIRONMENTAL SUSTAINABILITY ...........................................................................................................17

6. CONCLUSIONS AND RECOMMENDATIONS.........................................................................................34

1.1 Main findings

1.1.1 Village Savings and Loans Associations (VSLA)

1.1.2 Financial Services Association (FSA)

1.1.3 Other considerations

deliberate separation of approaches may be an appropriate approach where trust building is

1.2 Lessons learnt

1.3 Main Recommendations

2. Background to the review

Protected Area District Start Date of Supporting

Table 1. Protected areas with saving schemes in Tanzania

The first such microfinance scheme was

The purpose of this review was to achieve the following ends:

Layout of the report

The review team itself was made up of three members:

Table 2. Summary table

Jozani-Chwaka Swamp, coral rag forest, Grameen Control of illegal wood

JOCDO – Continuing to support

CARE - Establishing VSLAs RUCDO – Umbrella Organisation.

WWF – Facilitated the

WWF – Establish COCOBAs.

Great Ruaha River

Kaya Kinondo FSA established as part of

WWF – Direct Some

3.1 Jozani-Chwaka Bay National Park, Zanzibar, Tanzania

3.2 Ruvu South Forest Reserve, Tanzania

3.3 Great Ruaha River Catchment, Tanzania

education, and facilitating community sensitisation and awareness creation on natural

3.4 Rufiji, Mafia and Kilwa Seascape, Tanzania

3.5 Kayas Kinondo, Muhaka and Gogoni, Kenya

Image 3. Kaya Kinondo Financial Services Association. Photo R. Wild

3.6 Lake Bogoria National Reserve, Kenya

Image 4. Lake Bogoria and Flamingos. Photo J. Robinson

Village Savings and Loans Associations.

General description Review examples

Formal Bank Little access in most project

Figure 2. Generalised and simplified hierarchy of financial institutions

The Financial Services Association (FSA) model

Box 1. A Ready Made VSL at Kaya Muhaka, Kenya

Savings and Credit Cooperative Societies (SACCOS)

Image 6. Olkoshika FSA, Lake Bogoria. Photo R. Wild

5.1 Environmental sustainability

5.1.1 Individual business level

Resources use and environmental regulations

Peer assessments of the environmental impact of businesses

Generic enterprise environmental screening

5.1.2 Household level

Choice and options

5.1.3 Association level

Symbolic and ethical environmental links

5.1.4 Apex level

Training and trainers & apex organisations

5.1.5 Programme level

Coordinated implementation of the conservation and microfinance components

Mechanisms for linking microfinance to environmental sustainability