Social Fund
Each group may decide to have a social fund, which provides members with a basic form of insurance. It is not mandatory. The social fund serves as a community safety net for a number of purposes – such as emergency assistance, festivals and funeral expenses. Members agree upon a contribution that must be made by all members at every meeting. The social fund is not intended to grow, but to be set at a level that covers basic insurance needs. It is not distributed back to the members at the end of the annual cycle, but remains a group asset.
Record-keeping
Each member has a simple passbook in which their savings and loans are recorded. While the VSLA does not keep a group ledger, it maintains a simple centralised note-book in which the closing cash balances of the Loan Fund and Social Fund are entered at the end of each meeting. The members are expected to remember this at the next meeting.
Security
The materials, passbooks, loan fund and social fund of the VSLA are kept in a lock-box, which is safeguarded by the group Box-keeper between meetings. The lock-box has three padlocks and the keys are held by three members of the group who cannot members of the Management Committee. The system is robust and ensures that there can be no manipulation of the group’s passbooks or funds outside of group meetings.
'The Cycle'
Groups normally operate in one-year cycles. At the end of every cycle, the accumulated savings plus service charge earnings are shared out among the membership in proportion to the amount each member has saved. The annual share-out resolves any outstanding issues and builds confidence in the system. It is an 'action audit' that provides an immediate verification to all members that their money is safe and the process is profitable.
After the share-out, members who do not wish to
continue may leave the group and new members may be invited to join. Members who plan to continue to the next cycle can re-invest any amount they wish of their shared out
money in the loan fund for the next cycle. This initiates lending activities with a useful amount of money on hand.
When a new cycle begins, members conduct new elections, review their constitution and may make changes to the conditions that apply to savings, lending and the social fund. They may, for example, agree to change the social fund contribution, share price or the monthly loan service charge. However, the share value and loan service charge can never be changed during the cycle. After this process, the group then continues to operate independently in its second (and future) cycles.
Compliance with Sharia (Islamic law)
Both CRS and VSL Associates now publish versions of their training guides that are Sharia compliant. They can be downloaded from this website.