Consumer insights

Finance & fortune

November 7th, 2016

Henry, one of eight children, was only able to go to school until form two, the second year of secondary school, when his parents had to pull him out because they could no longer afford the fees.  He joined a polytechnic training institution in a nearby town and did courses in welding, masonry, and driving.  Once he finished, in 2009, he went to Webuye looking for work.  That’s where he met his wife, Naomi.  He was earning about KSh 7,000 per month working in a supermarket and supplemented that income driving a boda boda.  He heard from others that there were big opportunities in Mombasa.  In Mombasa, people said, you could earn up to KSh 2,000 in a day.  He and Naomi sold everything and left for Mombasa.  He was disappointed to find that there were no easy opportunities in Mombasa.  They thought about going home, but had no money to go back.

Henry eventually found a job as a shop attendant.  After he was dismissed from that job, he used his savings to start a small kiosk, which was run by his wife, Naomi.  That was closed when the two decided to move to a new part of Mombasa. At the time we met them, Henry was working as a tuk tuk driver, and Naomi was staying home, caring for their small child and the home.  Henry’s income went up and down depending on customer numbers.  He paid the vehicle owner KSh 1,200 per day and spent another KSh 500 on fuel.  Whatever was left, usually KSh 500-600, he took home.  When he really needed extra money, he worked longer hours, hoping to pick up more fares.

From his earnings, Henry gave Naomi between KSh 100-150 every day for breakfast and lunch, buying supper directly.  Although Henry thought things were getting better now that he was a tuk tuk driver, Naomi wasn’t so sure.

While in Webuye, Henry had opened a savings account with Post Bank.  He operated this account up until 2013 when he asked for a loan and was told about some lengthy processes he would need to undertake with partners.  Frustrated, he opened an account with Family Bank, where he was required to save for six months in order to qualify for a loan. After six months he got a motorbike loan which was given to him in kind. The motorbike was worth KSh 75,000, and he got someone to operate it, paying him daily, while he continued driving the tuk tuk. This way, he thought, he would have more income and be able to pay the loan on schedule.

But it wasn’t so simple.  Sometimes the motorbike operator would leave without notice and Henry’s motorbike business would be idle until he found someone else to operate it.  Henry also couldn’t earn from the tuk tuk when he was sick or the vehicle had a problem, since it was up to the owner to get it fixed.  Since Naomi wasn’t working, he put her in charge of collecting the funds from the motorbike driver and accumulating them to hand over to Henry who would make the loan payments.  Around the same time, she secretly opened her first bank account, at Equity Bank, where she wanted to start building up some savings to start a business.

Though he didn’t make all of his loan payments on time, the bank still gave him another loan of KSh 100,000.  Henry’s brother had just finished school, and Henry gave him this money as a gift to help him start a shop.  His brother wouldn’t have the ability to borrow on his own, and paying back a loan at the start of a new business would be a burden.  So, Henry struggled to make the payments himself.

I decided not to save at Post Bank… one can only save where he or she can be loaned whenever a problem arises.

Gitau Mburu, Policy Specialist, on how credit might be improved for borrowers like Henry and Naomi.

He was also paying off a loan his mother had taken for school fees for one of their siblings.  The family was unsure of how to pay the fees, but the mother was in a microfinance group.  They decided that she should take a KSh 50,000 joint liability loan, and Henry and his brother would alternate making the weekly payments of Ksh 1,000 on her behalf.

While paying his loans to Family Bank, he stopped saving at Post Bank.  In addition to the loan payments, Family Bank also had required savings to keep up with:

“I decided not to save at Post Bank because Family Bank is where I can get a loan. At Post Bank I asked about the loan issue but I was told that there are procedures which I needed to follow and I also needed to make the application somewhere else. So I realized it was hard because one can only save where he or she can be loaned whenever a problem arises. I still have an account there only that I don’t know if it was closed because it has been long since I went there, not even to withdraw.” 

But Family Bank began to disappoint him as well.  There was a lot of unnecessary back and forth when processing his second loan, and at one point he was even sent to another branch to continue the paperwork since the manager at his home branch was not around.  He says he felt “harassed.”  Once the second Family Bank loan was finished, he moved his savings from Family Bank to KCB.

KCB soon agreed to lend him KSh 150,000.  This time, he combined the money with KSh 50,000 from his bank savings and another KSh 50,000 from selling the motorbike to buy his own tuk tuk.  Since he was no longer paying the tuk tuk owner every day, he held onto more of his own revenues.

Looking back, he tells us, all three of his bank loans have been really helpful.  But he does wish the banks weren’t quite so strict about the timing of payments.  He never missed a payment, but sometimes he was a day or two late, and even then, there were penalties.

At home, he has a nailed-shut wooden box where he deposits his coins at the end of the day. He’s written on the box “Brian’s Bank” … this is money he’s saving for clothes and treats for his son.

Despite having some issues with the banks, his bank account is his most important saving device.  He says banks are safe since no one knows your PIN. They help him get loans, and their withdrawal fees are affordable.  They don’t completely replace saving in the house, though.  He still does this sometimes before taking money to the bank, so he doesn’t need to queue every day.  He admits, though, that it means he sometimes uses the money before he makes it to the bank to deposit.  Also at home, he has a nailed-shut wooden box where he deposits his coins at the end of the day.  He’s written on the box “Brian’s Bank,” reminding himself that this is money he’s saving for clothes and treats for his son around the holiday season.

Naomi has also been saving on her own.  Apart from her Equity account, she also belongs to an ASCA and one ROSCA where members are given kangas on their turn.  She’s also recently started working in a company that does garment printing, bringing some extra money into the home.  She uses some of this money for things the household needs, but Henry feels like, as the man of the house, he should take care of most things, and she should make decisions about her income independently.

The household’s income is above average in our sample.  They earn in a relatively stable way and save with discipline.  But, they still face the same liquidity problems that are familiar to many Diaries households.  Even though they’ve been able to do big things, like buy a tuk tuk, when unexpected things happen, even small events, there’s often no money to deal with them.  Once, for example, their son was admitted to the hospital, and they urgently needed KSh 4,500 for the bill.  Henry and Naomi could only come up with KSh 2,500. The hospital let them go home with a debt of KSh 2,000 that Henry cleared by selling an old television set.

Even though Henry now owns his own tuk tuk and Naomi is working, the couple claims their financial situation is actually worse today than it was during the Diaries.  For one, they have been paying a lot in loan payments.  And, their expenses have increased.  Brian is now in school, which runs an extra KSh 7,500 per term.  Henry’s sister has moved in with them, and they are also paying her school fees of KSh 32,000 per year.  Deteriorating economic conditions in Mombasa more generally have taken their toll on Henry’s business.  During the Diaries, he was bringing in KSh 2,200-2,300 in revenues per day.  These days, he’s averaging between KSh 1,800-2,000.  All of this has made the couple feel pinched, even as their income has more than doubled.



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