FSAs and their potential for growth and customer value creation

October 18th, 2017

This is the first blog in a series about financial services associations based on an FSD Kenya commissioned survey by BFA.


Joyce* is a skilled entrepreneur but if it weren’t for her Financial Service Association (FSA), her hotel would not be the size it is today. This would not just be bad news for her but also for her sick husband, their five children, her mother, brother, and three nephews all of whom depend on Joyce and her business.

Joyce is 41 and lives in Mwaani village in Kenya’s Makueni County.  She is part of a growing number of the community members who believe that while FSAs are not perfect, they are very good to have around, both for growing your business and engaging your community. She joined her FSA two years ago because she thought that it had lower interest rates on loans than other financial institutions, and was well managed.

Joyce uses the FSA for loans (which can be received in cash or as assets), investing in shares, saving, and for financial capability training. The training has taught her how to take and repay loans, increase shares in the FSA, and to budget better. Since becoming a member, she has borrowed as little as KSh 3,600 and a maximum of KSh 25,000 which she has used to expand her hotel. To Joyce, the FSAs are not just about business – they are personal. If someone cannot repay their loan, other members help out.  In the case of sickness, death, weddings or harambees (fundraising), one’s group members all chip in.

These FSA benefits are not only limited to Joyce.  Godfrey* has been a member of the Kakeani Financial Services Associations (FSA) since 2005, in fact, he was one of its very first members. Like Joyce, he values the social aspect  – he is the leader of two groups, one in the FSA and another that makes chicken feed for sale.

Godfrey has also received financial training which he believes is of great value. Empowered by this training, he encourages his group members not to default because if a group member defaults it affects the entire group’s savings which he believes holds everyone accountable and ensures they take loan repayment seriously.

A clustered FSA muungano meeting

Despite her excitement, Joyce worries about the FSA policy that says that the mandatory savings that serve as collateral for member’s loans can only be drawn at the end of the year. Even then, only 25 percent of the year’s savings can be withdrawn. “One cannot withdraw savings from a Muungano [the FSA credit groups] although the group can receive some portion at the end of the year,” she says.

Joyce saves but she is not sure if her savings are growing or earning interest and says she was never informed of this policy. However, Godfrey actually finds the savings useful. His group usually withdraws their 25 percent during the planting season or around Christmas.  In addition, he also receives dividends on his shares annually. Godfrey is a retired teacher who gets most of his income from farming of maize, beans, peas and green grams which his family both eats and sell. He has twelve children and lives with his second wife and grandchildren. He values the FSA.

Joyce is excited about the future of her FSA yet worried that with mobile banking products like M-Shwari and KCB MPESA, the FSA needs to adopt technology or suffer. She says that if the FSA used mobile banking, she could access money without the time and cost of traveling to the nearest FSA branch. She could repay her loans without taking time away from her business. Joyce however says that the group meetings would still be important. She values interacting with other members and receiving training from the loan officers. “FSAs should bring their services even closer to the people. I like their services and the way they take care of their customers. I feel that I will be there for a long time”, she says.

Godfrey agrees with Joyce on the importance of FSAs although he sees the answer as being less about mobile banking and more about being able to access his money from any financial service point rather than from only his FSA. “Most of us don’t have that IQ of banking with mobile banks,” he points out. He is confident that the advantages of being an FSA member surpass the concerns.  He feels that the FSA understands its customers unlike commercial banks.

* Pseudonym used to protect the identities of survey respondents.
  • Read the 2nd blog in this 3-part series: FSA asset financing: when paying yields more.
  • To learn download the full FSA impact report and learn about how FSAs fit a niche that is not covered by formal providers, click here.



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