Creating value through financial inclusion: the trust element

March 31st, 2017

‘’Mobile money ni nzuri sana kwa sababu ni ya siri na utaipata kwa simu ( Mobile money is very good because it is secret and is available on phone),” said Nyambura who finds mobile money easy and safe to use. She appreciated Mobile money which she confidently found to be secure and easy to use.

In an effort to understand the real needs of the people, our seventh ‘Field Friday’ exercise took us to Karagita in Naivasha. We set out to gather insights on which financial services people use and which ones they trust most.

In addition to mobile money, Nyambura, a tailor in Karagita, also has an account with a local bank and is a member of a chama. Although the chama helps her accumulate funds, she often finds herself frustrated when some members default on repaying their loans. On the other hand, while mobile money is secure and accessible, she lamented that the monthly repayment period was too short. Sometimes, she has to borrow money from family and friends to offset her mobile money loan and then borrow again to pay the family or friend: “Loan ya mobile money huwezi chukua kubwa sababu lazima ulipe baada ya mwezi mmoja (You cannot take a big loan from mobile money because you have to pay in one month),” she told us. Of all her financial services, Nyambura trusts her bank the most because she can both save and borrow from them. She recalled to us how she started borrowing after her bank informed her that they could lend her some money since she had been saving with them for some time. Nyambura has total trust in the brand of her bank and is convinced that borrowing from them is better than borrowing from friends or mobile money because of the longer repayment period.

We also met Michael, a motorcycle mechanic who told us that he uses mobile money, a bank account, a ‘secret place’ in his house and a chama. He told us that he finds the transaction charges on M-Pesa too high and thinks withdrawals should  be free: “Kama nimetumiwa elfu, na shida yangu ilikuwa elfu, nikitoa haitatimiza haja juu ya charges za withdrawal, kwa nini nisipate elfu yenye nataka? (If I receive KShs 1,000 and my problem requires KShs 1,000, on withdrawal I will get less than KShs 1,000 because of the withdrawal charges. Why shouldn’t I t get my Kshs. 1, 000?)’’Like Nyambura, he also prefers the bank the most, terming it as ‘cheaper’ although he was unsure of the bank charges. Nonetheless, he wishes his bank would be more willing to give him loans for working capital.

As we walked through the town, the afternoon drizzle led us to seek shelter under a boda boda (motor cycle) shed where we found a group of riders. They were happy to share their experiences with us and listed SACCOs, mobile money and chamas as their most commonly used financial services. However, a lack of trust between them affects their willingness to guarantee each other’s loans from financial institutions.

This, in turn, contributes to one of the major challenges they each face individually – the inability to access large loans to finance their personal goals and aspirations. Most had tried borrowing money to support their small-scale farming initiatives. But after several unsuccessful applications, the riders decided to form a savings group that could help them accumulate money to fund their projects. The groups proved to be useful to them because they were able to set their own roles and develop their goals accordingly.

Although unable to secure large loans from formal financial services, the riders took time to give their suggestions on how financial service providers (FSPs) can provide better value to low-income customers by bundling financial services with non-financial services. For instance, many hope to see FSPs offer advisory and capacity building services that can help them provide mentorship, capacity building and access to personal and business finance experts that can help them make better financial decisions and grow financially. It was very clear to us at this point that there were many different needs and expectations of financial services.

Our next stop was at a maize mill within the town. It is run by Mary who also uses a range of services including mobile money, a chama and an account with a microfinance bank (MFB). Mary was unhappy with the MFB’s requirements to maintain both group and individual accounts. She argued that these were expensive to maintain: “Kama mfanya biashara, unawafanyia kazi (As a business person, it’s like you are working for them),” she lamented. In addition, She also complained that high interest rates made loans very expensive, and did not understand why the MFB charges account maintenance and transaction fees yet the monthly required savings did not earn any interest.

As for the informal groups, Mary felt they were becoming unpopular because many members were increasingly defaulting on their loans: “mobile money ni nzuri kwangu kwa sababu ni wewe tu, haiulizi maswali, haujazi makaratasi, unapata pesa mara moja na unaweza kuitumia wakati wowote” (mobile money is the best for me because it is convenient, does not involve others, does not ask questions, one is not required to fill forms, it is instantaneous and one can transact at any time), she said

As we wound up our visit, it was clear that the residents of Karagita had strong and often differing views on both formal and informal financial services.

The emerging question for financial service providers is how they can provide financial solutions that enable industrious and innovative low-income people to gain financial stability in their lives. FSPs need to provide affordable and useful solutions that can be trusted by the users.



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