November 7th, 2016

Ernest grew up in a rural area in Kenya’s Central region and help from family enabled him to move to Nairobi for accounting studies in 1998 after finishing high school.  He completed Certified Public Accounting training up to section four, but found it hard to get a job.  In 2003, he found himself desperate.  He was living in a rental house in Nairobi, had no job, and his wife was suffering from severe depression.  He started taking casual jobs in construction to try and make ends meet.  When he got a bit of capital together, he began a business as a hawker selling second hand clothes.  Business helped him find his feet financially, but his wife never recovered.  She died in 2007, and Ernest never wanted to discuss what happened.

The hawking business enabled him to save, though, and eventually he was able to follow his real passion and open a dreadlocks salon in Kariobangi.  Before long, he met Greta, and they had their first child together.  Greta also worked in the salon, earning commission on the customers she served.

Apart from the salon, Ernest would sometimes get jobs with QTV as an MC, disc jockey, actor and comedian.  His easy charm made customers flock to his salon, where he served up not only style, but also warm conversation and cold sodas.  “You have to spend money to make money,” he told us.

In January 2013, Greta was expecting their second child.  Always a serious saver, Ernest had put aside KSh 20,000 for the delivery.  Most of his other savings was tied up in chamas and in his Equity Bank Jijenge account, where it was earmarked for investments.  But, when it was time for the child’s birth, nurses at the public hospital where they hoped to deliver were on strike, and they were forced to go to a private facility.  Greta would also need an emergency caesarian.  They needed KSh 34,000 instead of the KSh 20,000 they had planned.  He got a quick loan from one of his chamas to cover the financing gap.

By April, Greta was ready to come back to the salon.  Ernest felt like the like his first salon was running out of capacity.  His four workers were always busy there.  There was no space in the old salon for Greta to bring the new baby to work.  They decided to open a second location with space for a baby bed, and Ernest spent KSh 42,400 on new equipment and an internet connection for the salon via an informal arrangement with the cyber café next door.  His customers could now surf the web while they waited for service, rather than leave, potentially not coming back.  They were able to open up this new location by combining some of their savings with a soft loan of KSh 20,000 from Greta’s mother.

The couple have had mixed success in the world of formal finance.  Greta sees no reason in having a bank account, though both use M-PESA. She does most of her savings in a range of savings groups. She likes that they all mature at different times. One provides the payout in kind either by paying for food or utilities.  For her, this is convenient and all she needs.  Ernest is a super saver.  When we first met him, he had and Ordinary Account and commitment account, Jijenge, at Equity Bank.  But, when he was opening his salon, he tried to borrow from Equity and confirmed at two different branches that he could only borrow up to 60% of the balance in the commitment account.  This rule was a surprise to him, and he felt betrayed by this hidden product feature and the low interest earned on the account. He withdrew his money and moved it to Faulu, where he thought he would be able to borrow, and joined another ROSCA, where he could continue to save KSh 300 per day, instead.

In a typical month, they were making more than KSh 100,000 in profits and felt they only really need KSh 20,000 to get by.

Anne Gachoka, Associate at BFA, on the gender dynamics of money management in the household.

Not long after, he was also disappointed by his life insurance provider.  He was told there was a “glitch” in his account, and he needed to go to the main office to fix it.  It took several weeks for him to get the time to leave his business and visit the insurer where he found his debit orders hadn’t been working.  He paid his arrears, but then soon after canceled that policy as well as the education policy he had opened for his first born daughter.  A friend had a similar policy, and when it matured, he was not given his money.  Ernest was worried that he too might be duped.

Later, those fears would be realized.  Towards the end of the Diaries, Ernest pulled together KSh 200,000 from his savings and bought a car.  Greta wasn’t thrilled.  She would have preferred that they buy a piece of land and build another house. They’d spent KSh 100,000 building the one they had, but they were living illegally on a piece of government land. They could lose their home any time.  Ernest went ahead with the car anyway and bought an insurance policy from a friend.  Again, Greta worried about just how well that car was protected.  In 2014, Ernest and Greta were driving to her upcountry home when the car had a mechanical problem and sent them plunging into a valley, rolling over several times. The two were forced to spend KSh 120,000 on hospital bills and stay home from the salons for four months recovering.  The insurance company informed Ernest that since he did not have comprehensive cover, he was not entitled to any compensation for the vehicle.  Unbeknownst to Ernest, at some point he forgot one month’s premium, and the insurance told him after the accident that he actually owed them money rather than vice versa.

The two were grateful to be alive and especially glad that their two girls were not in the car during the accident.  Ernest was able to get a little money from selling the chassis of the crashed vehicle.  He combined that with another KSh 200,000 to buy yet another car, one he this time insured with a name brand insurer, hoping they might be more trustworthy.

Though business slowed down during their recovery period, the couple still managed to make a number of big investments.  Ernest proudly showed off the iPhone he bought for KSh 25,000 using his bank savings.  He also had done some renovations in the second salon using another KSh 35,000 of savings.  Using KSh 60,000 from a payout from one of Greta’s chamas and another KSh 40,000 from business profits over a few months, the two had opened a third salon in another part of Nairobi.  But without their full attention, it hasn’t really taken off yet.  They moved to a bigger house and began renting out their old house, still precariously located on government land.  They also started building a two-story house upcountry.  By the time we saw them in late 2015, they had already invested KSh 800,000 of a planned KSh 1 million project.  All of that money came from Ernest’s savings at Faulu.

And, all that savings has been made possible by earning much more than they need to simply be comfortable.  In a typical month, they were making more than KSh 100,000 in profits and felt they only really need KSh 20,000 to get by.  There was plenty of room for Ernest to buy beer for himself, soda for his clients, and to save and invest in the future.

But it doesn’t mean he doesn’t need to also borrow from time to time.  During the Update visit, Ernest told us he has become a regular client of KCB M-PESA.  He borrowed mostly when he had a cash flow problem at the business.  But, he also borrowed for other emergencies, like a few months before our interview, when he urgently needed KSh 25,000 to contribute to a funeral.

Ernest and Greta saw a bright future ahead. They expected the newest branch of their business to pick up, now that Greta could be there more often.  Soon, they will finish their construction project upcountry.  Once that’s complete, they’ll move onto another investment project: buying another plot of land in Nairobi.

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