Challenges in strengthening the informal social protection systems in Kenya

Markku Malkamäki

Outline

Informal financial groups

• Rotating Savings and Credit Associations (ROSCAs),

• Accumulating Savings and Credit Associations (ASCAs)

• Funeral groups

• Kinship groups

• Provide both financial inclusion and social protection and have done so for at least 50 years in Africa and Asia

ROSCA and ASCA: successes and failures

– 50% of the female adult population in Kenya in these groups

• Why popular: – Basic financial services – Forces people to save – Access to loans – Social functions: social support, meeting friends – Social protection in emergencies/crisis

• What are the weaknesses – Leadership problems – Members often loose money, because not everybody

repays, or money “disappears”

5

Facilitated savings groups • 15–30 members

• Save regularly

• Borrow from the fund

• Repay with interest

• Self-managing and self-governing after one year

• Savings group methodologies build on indigenous ROSCAs and ASCAs

• NEW RULES: Meeting procedures, metal box, locks, book keeping, rules, elections provide more transparent, accountable and safer services than the indigenous ASCA groups

• Distribute all the funds at the end of the year

• Training delivered by CARE, private sector and churches

Institutionalising suspicion

• In the context of co-operatives in Africa Dore (1988) notes that institutionalising new rules is essentially about “institutionalising suspicion” and is not easy

• To institutionalise suspicion successfully there needs to be a balance between the mutual trust and the mutual suspicion which the new rules seek to develop

• But this “trick is an immensely difficult one” (Dore 1988, 58)

Objectives of research

• To what extent do groups follow the new Savings Group rules after the ‘graduation’?

• What determines the differential success of

Savings Groups in adopting new rules

sustaining their operations in the longer term

Capacity building exercise

CARE

Trainers

Group

Sample

Nyamira Rachuonyo Total

Number of groups 12 12 24

Groups by delivery channels

1. CARE training 0 6 6

2. Faith Based Org. training 6 6 12

3. Franchisee training 6 0 6

Financial data on group

members (from records) 507 518 1025

Socio-economic data on group

members(respondents) 370 260 630

Quantitative data sets

• Questionnaire survey: information on socio-demographic, livelihoods, and data for the calculation of poverty levels.

• Panel survey of member and group level financial performance from group records

Qualitative data sets

• Interviews with key informants at the research sites

• In-depth semi-structured interviews with groups leaders and a sample of group members.

• Observation of group meetings

• Relationship maps

KEY

Nuclear Family

In-laws

Cousins/Aunt

ies/grandparents/Uncle

s

Monica Adhiambo

(Chairperson)

Millicent Ochieng

(Secretary)

Charles Mgewa

(Assistant Secretary)

Phanis Kouma

(Money Counter)

Monlca Onyango

(Treasurer)

Sarah Okinyi

Gilbert Ochoo

Patrick Ayieko

William Onditi

Margaret

Auma

Eunice Odada

Susan Onditi

Risper Odada

Serfine Auma

Fred Ochoo

Mercy Juma

Rosalina Onditi

Maritha Ayieko Judith Okoth

Mary Otieno

(Money Counter)

Caroline Okinyi

Jane Adhiambo

Pamela Juma

Beatrice Owino

Rose Odero

Rebeca

Nyandika

Jane Odhiambo

Mary Ooko

Judith Otieno Janet Oluoch

Nancy Ochieng

Loise Omondi

Beatrice Ndege

Group rules

• Some key rules provided by the Savings Groups methodology:

– Groups supposed so save in every meeting

– Loans for up to three months

– Share-out at the end of each cycle

– Method for calculating group profit

• Group members supposed to decide:

– How much interest in charged on loans

– What action group will take if members do not repay

– Fines

Results

• High variation in financial performance and rule following

– Mean ROS at the end of second cycle 82%, end of third cycle 60%.

– In four groups members lost money, but

– In several groups ROS around 100%

– In ¼ of groups all key rules followed but in the majority of groups key rules not followed

Results

Two most critical problems:

• At the end of cycle repayment problems in half of the groups

– which led to unjust distributional consequences

• Misappropriation cases in 2/3 of the groups (both group leaders and trainers)

Role of trainers in causing variation

• Groups trained by the private sector operator performed poorest.

– No oversight function

– Trainers misappropriated groups funds, collected yearly “registration fees for CARE”, even though CARE had left the area

• Several trainers ‘street-level bureaucrats’ that did not want to enforce rules that were against local norms

Role of trainers in causing variation

• Groups trained by the church delivery channels were the top performers:

– Trainers overseen by the church development committee

– Trainers church elders, higher education, experience from civil society work

Role of group leaders causing variation

• Repayment rules not properly discussed and agreed • Capacity building was successful in the sense that

most groups understood when leaders did not follow rules

• Leaders used power that had gained outside of the group or through the social relations of kin, gender, age and wealth to misappropriate funds

• In several cases leaders removed, but default and misappropriation cases not resolved

• Groups wanted CARE or trainer to enforce repayment, did not want to take responsibility

KEY

Nuclear Family

In-laws

Cousins/Aunt

ies/grandparents/Uncle

s

Samuel Ogwalo

(Chairperson)

Beatrice Odoyo

(Secretary)

Ruth Akoth

(Assistant Secretary)

Phoebe Juma

(Money counter)

Sheila Awuor

(box keeper)

Florence Achieng

(Treasurer)

Lilian Ogwalo Margaret Juma

Japeth Ongondi

Marcella Okumu

Agnete Auma

Eunice Owaka

Peter Onyango Peres Ochola

Benter Awino

Tetiyo

Juma

Rose Owuocha Benter Awino

Phoebe Akinyi

Mary Ochieng

Paulina Okatch

Robert Okatch

Kenneth

Otieno

Alice Adhiambo David Onyango Loice Okiri

Siprina Dete

Norah Adhiambo

Veronica Anyango

Joan Atieno

Alice Akello

Nancy Achieng

Nora Ochola Everlyne Onyango

Flora Awino Carren Awino

Impact of norms on performance

• Norm of fairness: kin cannot be excluded from joining groups and all members – including those who had not paid in time- should receive their profit

• The norm of “sympathy”: loan repayment was not enforced as long as people “were willing to repay”.

• The norm of open ended loans: people were not repaying until the group knocked on their door.

• In the Kenyan cultural context paying for services is a norm, be it for the police or the chief. In this context it was straightforward for a delivery channel to impose “registration fees”.

CARE

Trainer

GROUP

CARE

Trainer

GROUP

SG FORMAL

RULES

LEADERS

MEMBERS

WEALTH/CLASS/STATUS

ETHNICITY AGE

INFORMAL GROUP NORMS

SOCIAL RELATIONS

GENDER

COMMUNITY NORMS

Adjusted from Johnson& Sharma 2005.