NAIROBI: Wilson Maina used to prowl the alleys of Nairobi’s Mathare slums for years looking for victims to rob at knife point. But after a stretch in jail, redemption for one of Mathare’s most notorious thieves came in the form of a small loans programme run by one of a number of trusts that are transforming the lives of some of Kenya’s most impoverished people.
The trust named Jamii Bora, which means “A Better Family” in the east African lingua franca of Kiswahili, helped Maina turn $13 into a $26 dollar loan for a fruit and vegetable stall in 2000. Now he is a respectable landlord who ruefully recalls his stormy past.
“We hanged people’s necks, snatched people’s handbags and watches. At night we carried knives. I will stop you, and say ‘I want the money’, and if you make noise, I stab you,” Maina said.
Jamii Bora and a number of other such organisations have created a small boom for dreamers and entrepreneurs in Kenya through small loans or “micro-finance”, a movement that is turning heads and getting government backing.
People with amounts of money too small to take out commercial bank accounts use these small trusts to save and get access to credit that would otherwise be unavailable.
Cecilia Wanjiru was a Mathare food vendor who started her savings with Jamii Bora using $100. The money she saved enabled her to move into a more upmarket suburb where she now owns a cafe that employs four people.
“At first, I was eligible to take up a loan of up to $80 and this helped me improve on my business and buy cutlery,” she said. “Now my savings have increased and I can take a loan of up to $600.
The Kenya Association of Micro-Finance Institutions (AMFI) says only 10 per cent of the $804 million in demand for such tiny loans has been met so far, but that the small business sector where trusts like Jamii Bora are most active is booming.
AMFI chief executive Beatrice Sabana said small and medium businesses were growing quickly, with an estimated 6 million of them operating in the country.
“If you look in any market in any town, you can see that this sector is thriving and needs access to credit, so the demand is quite high, as is the growth,” she said.
As a sign of a growing industry, Faulu Kenya, one of Kenya’s leading small loans providers, issued a 5-year bond worth $6.6 million on the Nairobi Stock Exchange this month.
Ingrid Munro, the founder and managing trustee of Jamii Bora, said that the small loans are repaid promptly because the borrower needs to get more money to move into bigger business.
“The biggest drive for people to repay is that they want another loan and they can’t get the next loan and grow until they have repaid the previous loan,” Munro said.
Unlike Kenya’s commercial banks who make huge profits every year, business is tough for most small loans institutions providing financial services and loans worth an average $300, to small enterprises and low-income households.
President Mwai Kibaki has pledged to eradicate poverty and create jobs, a promise that many Kenyans feel the government has broken after its two years in power as corruption and the sluggish pace of economic reforms stunt growth.
The micro-finance sector is expected to get a further boost when Kenya’s Parliament passes a law to regulate it.
“Regarding the (Micro-Finance and other) bills, we have every reason to believe they are going to be approved during this coming session of Parliament,” said David Mwiraria, the finance minister.
The law will put the institutions under the Central Bank’s supervision and require them to protect its depositors’ money in case of insolvency, by joining the Deposit Protection Fund at the Central Bank.
“The law allows them (the institutions) to mobilise deposits. So that gives them access to gross capital, which has been constraining their growth,” Sabana said.
Previously, small loans institutions had to borrow expensively from other banks.
“With that they should be able to attract cheaper sources of capital,” Sabana said.
Access to loans is a problem across Africa. Over 56 per cent of Kenya’s 30 million people alone survive on less than a dollar a day.
Analysts say Africa’s rural poor have little access to loans from big banks and have little access to loans from big banks nor services such as credit, savings, insurance or money transfers.
To underscore the importance of small loans in helping people out of poverty, the United Nations declared 2005 the Year of Micro credit, saying that most of its beneficiaries were women in developing countries looking to better the lives of their families.
“If they increase their revenues, they can afford health care, they can afford school fees, they can afford sanitation, they can afford these kinds of social benefits,” the UN’s micro-finance expert Fod Ndiaye said.—Reuters
