The Financial diaries: A glimpse into how scarcity shapes life in Kenya

November 12th, 2020

The year 2020 will undoubtedly go down in history as the point in time when COVID-19 paralysed humanity. From the moment the pandemic gripped the world around March 2020, it drew comparisons to the 1918 Spanish Flu, and even the two World Wars, for its unrelenting assault on human lives, livelihoods and the global economy. In Kenya, low income households and the small enterprises – particularly those in the informal sector that account for an estimated 83.6% of total employment[1] – have borne the brunt of the pandemic.

Although there have been positive signs of hope in the search for a vaccine, it might be long before developing countries like Kenya can gain mass access to vaccines as they first have to pass the high threshold of medical science. Worse still, the wait is likely to be longer for Kenyans at the bottom of the pyramid, who incidentally constitute the majority of the population.

One may ask – how can low-income Kenyans survive the dual mire of the COVID-19 crisis and the lingering stranglehold of poverty? This question obviously had no straightforward answer. Finance is by nature a complex tool that organisations like FSD Kenya and others in the financial sector development space are only striving to shape into an enabler of poverty reduction. There are however ideas that can help shape the path towards a better, more inclusive financial landscape that gradually draws in more and more underserved segments of the population into the tent of prosperity.

One such idea is the use of the findings from FSD Kenya’s Financial Diaries study, which provide an insight into the financial lives of the country’s lowest income households to understand how scarcity shapes life in the country. The Financial Diaries are the outcome of an FSD Kenya project in which a team of researchers followed 300 households across five parts of the country for 18 months, tracking their financial usage every fortnight to generate a deep appreciation of their livelihood patterns and financial needs.  Starting in 2012, the team of 15 full time project staff catalogued every transaction the family could recall in the intervening weeks, accounting for every shilling of income, expenditure, and movement around financial devices.  Through this study, the project was able to gradually learn the financial patterns, struggles, achievements, and personal ambitions of these households.

Fast forward to 2020. COVID-19 struck, and the team was once again on hand to follow up on the same households, this time using a series of phone interviews to track the impact of COVID on their financial lives. This effort has been documented in the Kenya Covid-19 Diaries, a series of blogs and case studies that illuminate how these households are coping under the chokehold of COVID-19. More recently, the results of the original Financial Diaries study have been published in a new book titled Living on little: Navigating financial scarcity in modern Kenya.  The book, authored by Julie Zollmann, will be launched at the 2020 FSD Kenya Annual lecture in Nairobi. Julie is the key speaker in the lecture, the sixth in a series of public annual lectures that FSD Kenya has organised every year since 2015.

In describing the gist of her book, Julie explains that following the money trail across the sample made it apparent that experiences which would seem idiosyncratic actually reflected broader patterns and common systemic barriers that kept people from fulfilling their full potential. This statement draws interest to the many ways in which the Financial Diaries can be useful in the quest for inclusive finance.

Attaining inclusive finance involves providing a range of accessible, useful, and affordable financial services to low income populations, particularly those that are excluded from the formal financial system. Inclusive finance helps them to manage day to day, hedge against unexpected shocks that could upend their lives, and save for a better future.

The Financial Diaries provide a handy micro-economic perspective into the financial lives of ordinary Kenyans within their real-world contexts, realities, and day to day struggles. They also offer a peek into their challenges, fears, and hidden financial use cases that lie beneath the surface. This is because the Diaries present the profiles of real people and summarise their financial patterns and characteristics in ways that opportunities for financial service providers (FSPs) can leverage into viable business opportunities.

A keen study of these personal profiles, especially when taken through a market segmentation process such as this one carried out by FSD Kenya and the Consultative Group to Assist the Poor (CGAP) using data from FinAccess 2019, offers a telescopic image for financial service providers (FSPs) to identify entrepreneurial use cases that target or encompass low-income groups. The Diaries also offer a useful window for regulators and policy makers to see what life is like for Kenyans at the micro-level. This perspective is invaluable in the development of policies that nurture a financial ecosystem that enables FSPs to both make profit and promote inclusive finance. Of particular interest to FSD Kenya are financially underserved groups within the society. These include low income households, small enterprises, informal businesses, women, and the youth, among others.

The key takeaway from the book is that meaningful progress towards inclusive finance requires an intimate understanding of the bottlenecks that stymie efforts by low-income Kenyans to improve their lives. The book invites FSPs and policy makers to step into the shoes of the struggling single mother selling chang’aa (illicit brew) in a Mombasa slum to feed and educate her children, or the struggling young woman in rural Vihiga who seeks to expand her salon business by intermediating financial resources through saving and borrowing with difficulty.

Julie’s lecture and a read though the book will no doubt be an eye-opener for many in the financial sector. At FSD Kenya, we hope that the insights from the 2020 Annual Lecture and Julie’s book will inspire greater interest in people-centric financial solutions and policies that will in the long run help uplift the lives of Kenyans at the bottom of the pyramid. Only then can a steady, incremental stride towards the promise of long-term prosperity be sustained.

Philip Emase is Communications Manager at FSD Kenya. Twitter: @Philip_Emase @FSDKe


[1] Kenya National Bureau of Statistics (KNBS), 2018.



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