Innovation in financial services and financial literacy training for Nairobi residents

Hilary Nicole Zainab Ervin, Nairobi Community Manager
Nairobi, 4 December 2014

According to the FinAccess 2013 Survey, utilization of formal banking services in Kenya by adults has grown from 41 percent in 2009 to over 66 percent by 2013. Over the same period, the percentage of individuals using non-prudential [mobile] banking options as their primary monetary transaction method has increased significantly as well, from 30 percent to more than 63 percent respectively. In addition, rates of usage of informal lending methods and those excluded from banking services entirely have steadily declined.

Safaricom and Vodaphone revolutionized banking for Kenyans in 2007 with the introduction of M-Pesa. For the first time, highly impoverished individuals who were previously unable to access formal banking, were able to deposit money to an account. The services available to M-Pesa users took another leap forward in 2012 with the introduction of M-Shwari.

M-Shwari allows individuals to make deposits via their mobile phone to a savings account that generates interest at a rate of five percent a year. The service provides a flat interest rate of 7.5 percent on 30-day loans up to 20,000Ksh ($240 USD) that requires no collateral, has no transaction fees, and provides instant loan processing. A recipient's loan amount is dependent on a number of factors; the amount saved and the regularity of deposits to the service rank highly as advantages in obtaining a favorable loan determination.

In 2013, under the Ministry of Devolution and Planning, President Uhuru Kenyatta instituted the Uwezo Fund as a key Social Pillar of Kenya's Vision 2030. Such programs are critical to empowering some of the most vulnerable in Nairobi. However as Wanjiku Muhia, the MP from Nyandarua, points out, it is critical to train women in acquiring entrepreneurial skill so that recipients are equipped with the knowledge to make wise investment choices and not simply dig deeper into poverty.

Organization such as Faidisha SACCO, CAP Youth Empowerment Institute, and Shining Hope for Communities, operate to fill this gap. Faidisha provides their members with opportunities to expand small and micro businesses through the utilization of Kiva loans. Founded in 2012, Faidisha Kiva has registered 160 members who are saving between 20 to 50 shillings ($0.22 to $.55 USD) a day. They have conducted financial literacy training with over 50 members and provided larger business loans ranging from 3,000ksh to 30,000ksh ($33 to $332 USD) to 10 of their members while maintaining a repayment rate of 95 percent.

CAP Youth Empowerment Institute, a nation-wide network of 11 training centers, approaches financial literacy among youths from a capacity building perspective. Providing financial education alongside a diverse package of micro-enterprise and small business development trainings, they target their curriculum regionally to meet real economic demands. The results have been impressive, for example the Buru Buru Center in Nairobi have enrolled 883 youths in nine batches, providing training to 774 to date with another 98 undergoing the program currently. Of those, 511 youths have obtained employment and 49 entrepreneurs are operating small businesses.

Isaiah Opiyo, a financial literacy trainer, highlights the importance of understanding one's members in the design and implementation of financial literacy training initiatives. The organization Shining Hope for Communities (SHOFCO) addresses this through a holistic approach to micro-enterprise, comprehensive household education and grassroots based development infrastructure decision making. They target Kiberia and Mathare, two of Nairobi's large informal settlements, to achieve broad-based development from a gender equity approach; ensuring that all members are included in the services provided at the household and community-levels. If the past is any indicator, these innovative solutions, and other like it, will continue to evolve to meet the increased citizen demand of Nairobi's evolving financial services sector. Close.

Photo: Gates Foundation

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