What do Kenyans really want from financial service providers?

March 12th, 2018
Insights into the social value of financial services

A large number of financial devices that are used by Kenyans to manage their money involve social relationships: from savings or investment groups that operate according to specific protocols and norms, to less structured arrangements like welfare associations, to the very informal, like borrowing goods on loan from your local shopkeeper or exchanging resources with a neighbour or cousin from time to time as needs arise. Such social arrangements are a natural foundation for money management where formal financial services are not available or out of reach.  However, despite the growing proximity of bank branches, cash-in cash-out agent networks and proliferation of mobile phones which offer even remote populations a growing set of choices for basic, digital financial services, these arrangements persist. So, what is it about them that make them so useful and valued by people? and what does that answer suggest about why services like M-PESA, M-Shwari and Equity accounts have had so much success with the mass market, where others have failed?

Drawing on quantitative and qualitative research from over the past 6 years, we try and uncover some of the deeper drivers of why lower-income Kenyans use and value certain financial devices, like savings groups, more than say, bank accounts. What we found suggests that HOW financial services are delivered and WHAT those financial services provide socially matters just as much, if not more, than their core functions in terms of features and cost (functionality).  Certainly, M-PESA was a wild success because it enabled people to send money over distance better than any existing alternative at the time of its launch in 2007. But functional features were not the only reason it was successful, it also unmasked the high value and frequent social exchange of resources that occur within networks as part of peoples financial lives. Without these rich exchanges, M-PESA would have not have taken off.

Better understanding of the social – and not just functional – drivers of people’s financial behaviour is the focus of this research. The research found that low-income Kenyans manage their money in ways that contribute to their vision of living a good life.  This vision is not based solely on meeting physical and material needs but on a broader view of social wellbeing which has at its core people’s relationships to one another and the senses of identity, belonging and respect these engender; along with a moral understanding of how communities should work together to use resources to support and ‘uplift’ one another.  As a result, we identify some key motivations which underpin the financial solutions they seek.

They seek solutions which:

  1. Cultivate social relationships that create mutually beneficial dynamics of reciprocal support and generosity. This is an absolutely central feature of all the aspects presented here. Developing such relationships is critical to both surviving and thriving.  It enables people to call on support in times of critical need in a context where there are few – if any – state provided mechanisms of support.  Using funds to support others when one is able to spare them is therefore a means of building such relationships and recognise the way “…problems are for everyone, today it’s you, tomorrow it’s me”.  Cultivating relationships through lending resources to others (often with no set date for their return) enables people to protect themselves as well as develop their livelihoods.  Cultivating social relationships with money occurs both directly with other individuals and through financial groups.  Groups offer many forms of support which include but go beyond finance especially practical, social and emotional support in cases of emergencies, illness and death.
  2. ‘Make money work’ in ways that maintain and develop their resources over time. People frequently refer to funds put in the bank as them “just sitting”!  When money is working it is actively generating benefits in terms of resources and income for oneself or others.  The benefit is analogous to the process of re-production seen in the natural world in which crops and animals multiply.  For example, in the Kamba language the word ũsyao is used meaning produce or interest and coming from the word kũsyaa whose meaning is “to give birth”. On the other hand, money held in a transaction or savings account may help keep funds safe from immediate demands but rarely (if ever) enables it to grow in similar ways – interest is always outpaced by inflation and withdrawal fees reduce the total amount retrieved.  By contrast, funds held in financial groups – merry-go-rounds and chamas – enable oneself and other members to pool funds and borrow to undertake projects of business and investment.  This enables money to work and growth to occur while chamas may also produce significant dividends for members.
  3. Enable them to develop themselves, their families and communities. Living a good life in Kenya is about being able to provide for yourself and your family in terms of food, housing, education and so on.  Education is a huge aspiration which is seen as providing a key route out of poverty for the next generation.  Our research shows that educational expenses are often supported by uncles and aunts, and these nephews and nieces may reciprocate this support at some point in the future when they are able.

But this dynamic goes beyond families to friends, neighbours and local communities, recognising that their wellbeing is inter-connected and that one cannot thrive alone.  Indeed, people may seek out opportunities to ‘uplift’ others directly, such as a businessman in Kitui who bought motorbikes to use as bodabodas which he gave to friends he described as “needy persons” who then paid daily instalments.  With some pride the businessman reported that one of these friends now owns three motorbikes and another takes him to lunch saying “you made me to be where I am” so consolidating his friendship with them and opening new routes to future reciprocity.

  1. Enable them to feel a sense of identity, belonging and status in the community. Using money in these ways: making it work; building social relationships and developing oneself and others in order to ‘uplift’ them, in turn generate a sense of identity in the family and community and hence feelings of belonging and status.  These further consolidate the experience of mutual support and generosity and are important ways in which people benefit from using their money.
  1. Enable them to learn how to carefully manage their funds and encourage themselves to work hard. People value learning from others about how to manage their funds well in order to achieve their goals.  The discipline that merry-go-rounds and chamas offer for making small amounts of money productive is a particularly strong feature, which also encourages their members to be busy and work hard.  Moreover, relationships cultivated both through social networks and in groups are channels for receiving information from others, bringing new ideas and access to opportunities.

Of course seeking solutions with these characteristics is a difficult process and does not necessarily go smoothly.  Experiences of mistrust and opportunism are frequent, and for example, finding a “good” group can be a tortuous process.  Nevertheless, when one is found, it is valued extremely highly and this underlines the features presented above.

The key point is that these are not characteristics that the conventional products of the formal financial sector offer.   Money saved in a bank “just sits”, and rarely produces a relationship which brings the reciprocal offer of a loan when in need.  Money held in banks is not seen as working to uplift family, friends and community and does not produce a sense of belonging or community.  Nor does interaction with the bank bring much in the way of new information or opportunities for livelihood development.

Financial service providers that can organise their offering and design innovative products that support these features in ways people understand are likely to have much greater appeal.



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