Over the next three weeks, we will be releasing three publications based on findings from the Kenya Financial Diaries Update, a follow up study with the Kenya Financial Diaries households. A link to the first paper is here. Stay tuned for more!
At the end of 2013, Lucy and her adult daughter were just barely scraping by from sales of mandazi and porridge to their customers in one of Nairobi’s largest informal settlements. Every month was a struggle to pay rent and school fees. In addition, her son was battling a mental illness that required frequent visits to a specialist at Mathare Mental Hospital and prescription medication, which Lucy was often unable to fill. What would happen to Lucy? Could she get out of this situation? If so, how?
Two years after the close of the initial Kenya Financial Diaries study (Diaries) in 2013, we re-assembled our research team and went to find out what role financial services were—and weren’t—playing in the important changes in people’s lives. The Diaries gave us an in-depth view into the financial lives of participating households in the short-run; a follow up study would give us the ability to explore the relationship between financial services and changes in well-being in the longer-run.
The news for our respondents was mostly positive. About half told us their economic situation had improved since the Diaries closed. The median household’s per capita monthly income had increased 31%, translating into an extra $6 per person per month, a small but meaningful change.
Some stories signaled transformational changes were on the way. With pride, one respondent brandished his son’s university offer letter with tears in his eyes; no one in the family had ever gone past Form 4. Finally, years of struggle to pay school fees were paying off. Another young man, one who did not get an offer for university, moved to Nairobi and managed to land some roles at the National Theater. His mother told us how she had just seen him in a play on TV days before we arrived to visit. He was now doing well financially, even sending money home to help pay fees for his younger siblings.
Still, possibility is not a promise. Thirty-three percent of our families felt that their economic circumstances had deteriorated, and another 18% said nothing had changed. In spite of the general rise in incomes, among the Diaries families that were living below the $2/day poverty line in 2013 (based on income) only 12%, 34 families, managed to crossed over the poverty line.
We visited one grandmother whose grandson was repeating kindergarten for the third time. She couldn’t come up with the money for class one. Another young man had lost his home and belongings in a devastating fire. He hoped his family would come through and help him rebuild. They did not.
Financial services never took center stage in people’s assessment of changes in their own well-being, though they did weave their way through everyone’s story. Changes in income—primarily from the expansion and contraction of small businesses—played the most salient role in people’s shifting fortunes. And new or unexpected expenditure obligations—often the burden of school fees and paying for relatives’ medical care—were most often blamed for holding people back.
And in all these cases, finance played a role: Chamas helped many to make home improvements, pay school fees, grow businesses, and even make dowry payments after long delays. Personal savings and loans from banks and relatives helped many expand their businesses and grow their incomes. M-PESA enabled ongoing remittances as well as welfare groups that came to the rescue in times of urgent need.
Still the reach and impact of the financial sector was incomplete. In Kenya’s increasingly vibrant digital money ecosystem, the financial sector is poised to better support people’s ongoing efforts to improve their lives. The question is, how?
And here, our respondents’ stories offer up some suggestions.