Challenges in strengthening the informal social protection systems in Kenya
Markku Malkamäki
Outline
Informal financial groups
• Rotating Savings and Credit Associations (ROSCAs),
• Accumulating Savings and Credit Associations (ASCAs)
• Funeral groups
• Kinship groups
• Provide both financial inclusion and social protection and have done so for at least 50 years in Africa and Asia
ROSCA and ASCA: successes and failures
– 50% of the female adult population in Kenya in these groups
• Why popular: – Basic financial services – Forces people to save – Access to loans – Social functions: social support, meeting friends – Social protection in emergencies/crisis
• What are the weaknesses – Leadership problems – Members often loose money, because not everybody
repays, or money “disappears”
5
Facilitated savings groups • 15–30 members
• Save regularly
• Borrow from the fund
• Repay with interest
• Self-managing and self-governing after one year
• Savings group methodologies build on indigenous ROSCAs and ASCAs
• NEW RULES: Meeting procedures, metal box, locks, book keeping, rules, elections provide more transparent, accountable and safer services than the indigenous ASCA groups
• Distribute all the funds at the end of the year
• Training delivered by CARE, private sector and churches
Institutionalising suspicion
• In the context of co-operatives in Africa Dore (1988) notes that institutionalising new rules is essentially about “institutionalising suspicion” and is not easy
• To institutionalise suspicion successfully there needs to be a balance between the mutual trust and the mutual suspicion which the new rules seek to develop
• But this “trick is an immensely difficult one” (Dore 1988, 58)
Objectives of research
• To what extent do groups follow the new Savings Group rules after the ‘graduation’?
• What determines the differential success of
Savings Groups in adopting new rules
sustaining their operations in the longer term
Capacity building exercise
CARE
Trainers
Group
Sample
Nyamira Rachuonyo Total
Number of groups 12 12 24
Groups by delivery channels
1. CARE training 0 6 6
2. Faith Based Org. training 6 6 12
3. Franchisee training 6 0 6
Financial data on group
members (from records) 507 518 1025
Socio-economic data on group
members(respondents) 370 260 630
Quantitative data sets
• Questionnaire survey: information on socio-demographic, livelihoods, and data for the calculation of poverty levels.
• Panel survey of member and group level financial performance from group records
Qualitative data sets
• Interviews with key informants at the research sites
• In-depth semi-structured interviews with groups leaders and a sample of group members.
• Observation of group meetings
• Relationship maps
KEY
Nuclear Family
In-laws
Cousins/Aunt
ies/grandparents/Uncle
s
Monica Adhiambo
(Chairperson)
Millicent Ochieng
(Secretary)
Charles Mgewa
(Assistant Secretary)
Phanis Kouma
(Money Counter)
Monlca Onyango
(Treasurer)
Sarah Okinyi
Gilbert Ochoo
Patrick Ayieko
William Onditi
Margaret
Auma
Eunice Odada
Susan Onditi
Risper Odada
Serfine Auma
Fred Ochoo
Mercy Juma
Rosalina Onditi
Maritha Ayieko Judith Okoth
Mary Otieno
(Money Counter)
Caroline Okinyi
Jane Adhiambo
Pamela Juma
Beatrice Owino
Rose Odero
Rebeca
Nyandika
Jane Odhiambo
Mary Ooko
Judith Otieno Janet Oluoch
Nancy Ochieng
Loise Omondi
Beatrice Ndege
Group rules
• Some key rules provided by the Savings Groups methodology:
– Groups supposed so save in every meeting
– Loans for up to three months
– Share-out at the end of each cycle
– Method for calculating group profit
• Group members supposed to decide:
– How much interest in charged on loans
– What action group will take if members do not repay
– Fines
Results
• High variation in financial performance and rule following
– Mean ROS at the end of second cycle 82%, end of third cycle 60%.
– In four groups members lost money, but
– In several groups ROS around 100%
– In ¼ of groups all key rules followed but in the majority of groups key rules not followed
Results
Two most critical problems:
• At the end of cycle repayment problems in half of the groups
– which led to unjust distributional consequences
• Misappropriation cases in 2/3 of the groups (both group leaders and trainers)
Role of trainers in causing variation
• Groups trained by the private sector operator performed poorest.
– No oversight function
– Trainers misappropriated groups funds, collected yearly “registration fees for CARE”, even though CARE had left the area
• Several trainers ‘street-level bureaucrats’ that did not want to enforce rules that were against local norms
Role of trainers in causing variation
• Groups trained by the church delivery channels were the top performers:
– Trainers overseen by the church development committee
– Trainers church elders, higher education, experience from civil society work
Role of group leaders causing variation
• Repayment rules not properly discussed and agreed • Capacity building was successful in the sense that
most groups understood when leaders did not follow rules
• Leaders used power that had gained outside of the group or through the social relations of kin, gender, age and wealth to misappropriate funds
• In several cases leaders removed, but default and misappropriation cases not resolved
• Groups wanted CARE or trainer to enforce repayment, did not want to take responsibility
KEY
Nuclear Family
In-laws
Cousins/Aunt
ies/grandparents/Uncle
s
Samuel Ogwalo
(Chairperson)
Beatrice Odoyo
(Secretary)
Ruth Akoth
(Assistant Secretary)
Phoebe Juma
(Money counter)
Sheila Awuor
(box keeper)
Florence Achieng
(Treasurer)
Lilian Ogwalo Margaret Juma
Japeth Ongondi
Marcella Okumu
Agnete Auma
Eunice Owaka
Peter Onyango Peres Ochola
Benter Awino
Tetiyo
Juma
Rose Owuocha Benter Awino
Phoebe Akinyi
Mary Ochieng
Paulina Okatch
Robert Okatch
Kenneth
Otieno
Alice Adhiambo David Onyango Loice Okiri
Siprina Dete
Norah Adhiambo
Veronica Anyango
Joan Atieno
Alice Akello
Nancy Achieng
Nora Ochola Everlyne Onyango
Flora Awino Carren Awino
Impact of norms on performance
• Norm of fairness: kin cannot be excluded from joining groups and all members – including those who had not paid in time- should receive their profit
• The norm of “sympathy”: loan repayment was not enforced as long as people “were willing to repay”.
• The norm of open ended loans: people were not repaying until the group knocked on their door.
• In the Kenyan cultural context paying for services is a norm, be it for the police or the chief. In this context it was straightforward for a delivery channel to impose “registration fees”.
CARE
Trainer
GROUP
CARE
Trainer
GROUP
SG FORMAL
RULES
LEADERS
MEMBERS
WEALTH/CLASS/STATUS
ETHNICITY AGE
INFORMAL GROUP NORMS
SOCIAL RELATIONS
GENDER
COMMUNITY NORMS
Adjusted from Johnson& Sharma 2005.