Group Savings Give the Opportunity to Meet Communities’ Financial Needs

In July 2012 about 106 Community Economic Development (CED) Msingi wa KAPESA savings club (Mwak) members have lent to their members an aggregate of 448,000Ksh (Kenyan Shillings) in microloans. The loans were given for a three month term. At the end of the third month, all clients successfully paid their loan on the agreed terms and time frame with 100% recovery rate. The loan is mainly meant for use to fill the cash flow gaps of the borrowers, purchase stock or start new small businesses. This loan service gives Nuru farmers the opportunity to get accessible credit service with low interest rate.

Farmers living in extreme poverty usually seek interest free money from family or friends to fill their cash flow needs. This need however, is not an easy bet. Most family or friends might not have money at hand when an immediate cash need arises. When available, it is usually comes with the responsibility of reciprocity and paying back on an agreed time frame. When farmers don’t have any option of getting money from families and loved ones, they usually borrow from local moneylenders with high interest rates.

Mwak provides the opportunity for Nuru farmers to save money on a regular basis and use the savings to lend out to themselves when they face important and immediate cash needs. The loan is also used for well-intended investment opportunities in micro-enterprises.

Over the past two decades, millions of people across the world have been uplifted from extreme poverty through microloan programs. These interventions proved that poor people could run a successful micro-enterprise and be able to escape from extreme poverty.

Most micro-enterprise interventions focus on the urban poor and provide support to selected micro-entrepreneurs. The inaccessibility of rural villages and the cost associated with it are the main reasons for the lack of affordable and accessible microfinance services to the rural poor. Nuru’s CED program is created with the intention of bridging this supply gap.

Nuru’s Mwak program is giving Nuru farmers a chance to learn money management skills through financial literacy trainings and get accessible and affordable financial services. The group loan program is one of such services, which helps poor farmers to weather economic shocks by providing small loans at flexible and affordable terms. CED borrowers once again proved that they could take a loan, use the loan for important and crucial needs and be trusted in fulfilling their loan obligations.

About Elias Fanta

Financial Inclusion Strategic Advisor — Elias initiated and coordinated the first microfinance project in southern Ethiopia. For eight years he worked for the German International Cooperation (GIZ) in Ethiopia as a program officer. Elias graduated with a BA in Economics from the Addis Ababa University, MA in Development Management, and PhD in International Development Studies from the Ruhr University of Bochum.

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