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Use and Impact of Savings Services for Poor People in Kenya Contribution to Savings and the Poor the methods, use and impact of savings by the poor of East Africa

E.H.A. Mugwanga

May 1999

MicroSave – Market-led solutions for financial services

Use and Impact of Savings in Kenya – Mugwanga

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TABLE OF CONTENTS Abbreviations and Glossary

1.0 INTRODUCTION 1.1 Background of the Study 1.2 Savings and MCI Clients 1.3 Lumpsums for MCI Clients 1.4 Savings and Microenterprises 1.5 The Financial System and The Regulatory

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and Supervisory System 1.6 Regulation and Supervision 1.7 From Microcredit to Microfinance Institutions

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2.0 THE SERVICE PROVIDERS 2.1 Informal Institutions 2.1.1 Rotating Savings and Credit Associations 2.1.2 Accumulating Savings and Credit Associations 2.1.3 Social Funds 2.1.4 Harambee 2.1.5 Other Devices 2.2 Semi Formal Institutions 2.2.1 Microfinance Institutions 2.2.2 Financial Service Associations 2.3 Formal Institutions 2.3.1 Post Office 2.3.2 Savings and Credit Cooperative Societies 2.3.3 Commercial Banks

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3.O THE SERVICE USERS 3.1 Socio Economic Status 3.2 Occupation 3.3 Gender 3.4 Age

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4.0 IMPACT ON INSTITUTIONS AND USERS 4.1 Difficulties in Assessing Impact 4.2 Impact on Institutions 4.2.1 Character Assessment 4.2.2 Collateral 4.2.3 Group Cohesion 4.3 Impact On Users 4.3.1 Merry-Go-Rounds 4.3.2 Regular Compulsory Savings 4.3.3 Group Savings Accounts 4.3.4 Own Bank Accounts 4.3.5 Set Offs

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5.0 CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary Analysis 5.2 Recommendations

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MicroSave- Market-led solutions for financial services

Use and Impact of Savings in Kenya – Mugwanga

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APPENDICES Appendix I Case Studies and Focus Group Discussions Appendix II Staff of MCIs Interviewed Appendix III MCI Details

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ABBREVIATIONS AND GLOSSARY AFC ASAL BDO CO CS DFBK FSA HFCK ICDC IDB IFAD KREP KTDC KWFT MCI MEC MFI MGR NCCK NGO FNGO SACCO WEDCO

Agricultural Finance Corporation Arid and Semi Arid Lands Business Development Officer Community Organiser Case Study Development Finance Bank of Kenya Financial Service Association Housing Finance Company of Kenya Industrial and Commercial Development Corporation Industrial Development Bank International Fund for Agricultural Development Kenya Rural Enterprise Programme Kenya Tourist Development Corporation Kenya Women’s Finance Trust Micro-credit Institution Market Enterprise Centre MicroFinance Institution Merry Go Round National Council Of Churches of Kenya Non Governmental Organization Financial Non Governmental Organization Savings and Credit Cooperatives Society Women Economic Development Company (CARE Project)

Active Clients

Clients of an MCI group who attend meeting and are saving into the collateral Account Clients of an MCI who have outstanding loans

Active Borrowers Enterprise Group [EG] Market Enterprise Center [MEC] Itega Kiwa Watano

Group of five PRIDE clients who cross-guarantee one another’s loans PRIDE's meeting place for several Enterprise Groups in one area Kikuyu word rotating savings and credit associations KREP’s Centre (40-50 members) Group of five KREP clients who cross-guarantee one another’s loan

MicroSave- Market-led solutions for financial services

Use And Impact Of Savings Services For Poor People In Kenya E.H.A. Mugwanga 1.

INTRODUCTION

1.1 Background of the Study From the middle of the 1980s, micro-enterprises have commanded public attention and increasingly public support in the form of micro-credit schemes, programs