Toddler takes first steps in finance

Current economic news may make for worrying reading for many of us, but, for communities in Africa which are ignored by the big banks, a local savings and loan scheme is proving a great success.

Abandoned on a stranger's doorstep just hours after birth, little Paulo's chances of survival were low.

Found wrapped in just a polythene bag by a man alerted by his persistent crying, Paulo was taken in by the woman whose house he had been left at - Lucia.

Now, in the remote district of Geita in Mwanza, Tanzania, Paulo is a happy and thriving toddler, but with a difference.

For this is a baby with his own savings account, in an area where mainstream banks don't have clients due to low incomes and lack of economic activity.

Instead Plan has set up a scheme called the Village Savings and Loans Associations (VSLA) where communities set up their own savings groups, acting like miniature banks.

Thanks to this initiative, Paulo now has his own pool of money from which he can pay towards his future, such as covering the cost of schooling and health care.

Lucia, a widow with three children of her own, said she had not hesitated to take little Paulo in when he was abandoned but that she had worried for his future, and the addition of an extra mouth to feed.

Now his legal guardian, Lucia said: "Paulo was spotted by a passing man at about midnight; the man had heard the child crying and woke me up.

"We took him to the police and then the hospital for medical attention. Our efforts to find his parents were unsuccessful so I was asked if I could raise him.

"Though I am a widow with three children of my own I couldn't say no to little Paulo - he had no-one and I could not abandon him as well."

In February last year, Lucia, who has her own vegetable stall, met Plan staff working in her village and they explained to her about their new VSLA scheme. They told her that if she joined she could have her own savings - something she has never been able to have before.

Immediately Lucia saw an opportunity for Paulo as well.

"I wanted so much to save for Paulo's future," said Lucia. "So I registered him. Paulo is the member, not me, and this helps me to focus on how useful saving up for him will be."

Lucia saves around 2,500 Tanzanian shillings a week (around £1.70) which goes to her village's savings group. All the members save their own amounts and contribute to the pool of money on a weekly basis, with records of every entry kept.

The group then uses the pool to give out loans with a payback interest of 10% a month - high, but manageable due to the small amounts involved. These loans are usually for healthcare, setting up businesses, and emergencies, giving people a chance to take control of their own lives.

Lucia expects to get a return on her savings of up to 90% at the end of the year - more than enough to pay for Paulo's education when he is old enough.

"As well as the savings services I was given six weeks training in credit and savings and realised how many opportunities the VSLA groups gave us," said Lucia. "We now have a social fund, a health fund, insurance fund and education fund which help me plan for emergencies and life cycle events.

"I took a loan out and expanded my small vegetable stall business as well and now Paulo can go to school, have healthcare and enjoy his future."