From Humanitarian Assistance to Economic Resilience in Yemen

An estimated 243.8 million people living in 75 countries were in need of humanitarian assistance in 2020. Access to financial services helps people in these communities manage short-term cash flow, address income shocks and build longer-term resilience.  But when crisis hits, formal financial institutions can find it difficult to operate. And they often see people living in emergencies as unable to engage with financial services – especially when they are women. Despite the clear demand, sectoral knowledge around extending access to financial services for women in humanitarian contexts remains underdeveloped.  

To help bridge the gap between short-term humanitarian assistance and longer-term resilience, CARE International has developed an approach which adapts our Village Savings & Loans Association (VSLA) model to the complexities of humanitarian settings. Results from a 2021 pilot study in Taiz, Yemen - which reached 300 women - show how the VSLA in Emergencies (VSLAiE) approach can help extend access to financial services to some of the most underserved communities in the world.

The context: Taiz, Yemen

The Yemen civil war began in 2014 and has had a severe and wide-reaching impact on the Yemeni people, who are living through a protracted crisis of acute food insecurity and economic decline. Over 20 million people - two thirds of the population - need humanitarian assistance.

CARE’s VSLAiE pilot was implemented in Taiz, a district in southwestern Yemen which has been a flashpoint of the war. The crisis has led to a near total collapse of social protection and government-run services, and this gap is now partially filled by humanitarian agencies as well as social solidarity networks. In the month preceding the start of our pilot, 58 percent of people needed to borrow from friends, family or acquaintances, demonstrating just how much people rely on each other to meet their needs in this context.

The approach: VSLAiE

The VSLAiE approach builds on CARE’s traditional VSLA model by introducing four components which strengthen its integration within humanitarian programming:

1. Preparedness: Context analysis, contingency planning and preparedness are critical steps that enable organizations to respond quickly and effectively during a crisis. CARE’s VSLAiE approach includes the provision of standard operating procedures, tools to strengthen key aspects of contextual analysis - including gender analysis, and training staff on VSLAiE.
2. Linking VSLAs with Cash and Voucher Assistance (CVA): VSLAs and CVA can be highly complementary interventions, but they need to be managed carefully to ensure that they do not negatively impact upon one another. The successful integration of VSLAs and CVA requires an assessment of markets, gender norms and other needs, as well as the appropriate identification and targeting of households.
3. A Flexible Cycle: The VSLAiE approach allows for a cycle which can be shortened to less than the 12 months of a traditional VSLA cycle, to adapt to the context and ensure that humanitarian programming constraints can be dealt with appropriately. This step also requires an emphasis on accompaniment and responsiveness. Due to the instability of conflict-affected contexts, it is important - particularly within the first cycle of a VSLA - to ensure close accompaniment and good communication channels between the team, groups and community. 
4. Building economic resilience through livelihood programming integration: This step is only recommended for groups that have completed at least one savings cycle. This step was not completed during this pilot and more information will be shared on its integration in future research on the VSLAiE approach.

Key results

What we found in our Yemen pilot went beyond extending access to financial services. It also showcased how financial services can play an important role in supporting social solidarity and building community resilience.

Ultimately, the VSLAiE approach delivered greater economic resilience for participants and the number of VSLAiE members with savings increased from 3 percent to 100 percent by the time the pilot concluded. The number of people relying on negative livelihood coping strategies (such as selling assets or land) dropped from 39 to 28 percent. Business activities also increased. Community members desired longer-term economic security and requested training in marketing, business skills and vocational skills such as hairdressing. By the end of the pilot, 48 percent of members had set up small business activities with their money.

Key learnings and takeaways from the VSLAiE pilot in Yemen included:

1. With adequate accompaniment, time and tools, it is possible to establish fully functioning and effective VSLAs. VSLAs are less common in traditional humanitarian programming, and there is likely to be a learning curve when teams first implement them. Implementation can be made smoother by ensuring:

• Sufficient time and tools to ensure that groups can mature from savings to lending and start to become comfortable in their lending practices.
• Accompaniment of communities and an ability to adapt to feedback in a timely way.

2. Business skills training helped VSLA members feel more comfortable with the risks of taking and giving loans. At the beginning of the project, VSLA members were hesitant to lend due to a fear of people defaulting and a loss of savings. As a result, loans in the earlier part of the project were mostly low value. However, by the end of the project, all VSLAs had begun lending and 193 loans had been distributed to members.

Providing training had a significant impact on lending practices. As they became more confident in their business skills, members started providing larger business loans. Whereas loans for consumption smoothing made up 60 percent of loans in the earlier part of the project, in the last two months they were less than half (48 percent) of loans. Meanwhile, loans for business investment increased from 23 to 44 percent after business skills training was provided. Groups felt more confident in lending larger amounts of money due to the combination of becoming more comfortable with the methodology and feeling more confident in lending to people who wanted to set up businesses.

3. The impact of VSLAiEs can extend beyond their membership to support the wider community.  Each VSLA has an additional Social Fund that members pay in to, with the aim of covering members’ emergencies or urgent needs. However, VSLAs are ultimately owned and run by the community and can take approaches that suit their context, and in Taiz, groups chose to distribute funds to people outside their groups who needed help. At the end of the project, 89 percent of VSLAiE members stated that they and their group had used money from the Social Fund to help non-members respond to crises – for example to pay for medical bills or to look after children who had been orphaned. In effect, the VSLAs began to function as a kind of informal social protection in the absence of state assistance for the vulnerable, further widening the impact of humanitarian assistance.  

CARE’s VSLAiE pilot in Yemen demonstrates that it is possible to establish successful VSLAs, even amid acute food and livelihood crises. By making use of the complementarities between cash transfers and VSLA, and responsibly providing simultaneous access to both interventions, VSLAiEs can help people bridge the gap between humanitarian assistance and longer-term economic resilience.

Moving forward

We cannot leave people in crisis behind. As a sector, our approaches to financial inclusion must innovate to ensure that even in emergencies, people have the tools and resources they need to build resilience. 

To better understand the longer-term sustainability of the results of this pilot, CARE plans to conduct a sustainability review of VSLA programming in Yemen, including ongoing monitoring of the groups established as part of it. We are also looking to establish further research in other locations to build up a body of evidence on how VSLAiEs can be adapted to a wide variety of contexts. This process has already begun with ongoing pilots in Syria and Jordan - which both highlight contextual differences - and we will be broadening the scope of our research with new VSLAiE pilots in Colombia and Ecuador in 2022.