Magazine article Women & Environments International Magazine

Development and the Nature of Microfinance in Kenya

Magazine article Women & Environments International Magazine

Development and the Nature of Microfinance in Kenya

Article excerpt

KENYA HAS HAD MORE EXPOSURE TO micro-finance than any other country in Sub-Saharan Africa, with micro-credit programmes dating back to the early 1980s. The implementation of economic liberalization and reform programs in Kenya in 1993 sparked an explosion of micro-enterprises, and most Kenyan households now depend on micro-enterprises for their income. However, except possibly for the Kenya Post Office Savings Bank, banks in Kenya have not paid much attention to the poor.

The traditional approach of getting credit from friends, relatives, shopkeepers and "merry-go-rounds" (Rotating Savings and Credit Associations or ROSCAs) is still largely practiced in Kenya, with ROSCAs being most common. A small group of individuals, mostly acquaintances, come together and contribute a sum of money to a common fund periodically - say, once a month. Allocation of the fund is mostly by lottery and each member of the group takes turns to use the fund. Sometimes, the organizer of the group takes the first turn. At the end of each cycle, members decide whether to continue the operation and/or vote again. These groups have sets of etiquette and rules to govern them. They have been largely dominated by women but in recent years more men have joined self help groups, due to the hard times they are facing and the economic downturn.

In the 1980's, some specialized micro-credit organizations began operating, with the two main ones being K-RE, and Kenya Women's Finance Trust (KWFT). These organizations were also heavily subsidized at the time and used the integrated (credit and training) approach to assist microenterprises. Other prominent institutions that emerged were Promotion of Rural Initiatives and Development Enterprises (PRIDE), FAULU (Swahili for Success) and increasingly other institutions like National Council of Churches of Kenya (NCCK) and CARE-WEDCO (Women's Economic Development Company). K-REP initially had a limited loan portfolio but focused more on lending funds provided by the U.S. Agency for International Development and other donors to smaller organizations like NCCK and KWFT. With time the approach began to be more focused and sustainability oriented, following more interest and knowledge about the microfinance industry. …

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