Bringing Money to the People

In a busy village located in North Rift, Kenya, Joyce Keter signs a withdrawal slip and receives several shillings notes from the cashier at the small bank of Kina Financial Services Association. The middle aged mother of four says that the account at Kina is the first she’s ever held, and she is still awed by her credit card. She is “saving big by starting small.”

Financial Service Associations (FSA) also referred to as Village Banks, are membership-based financial institutions. The shareholders (members of the FSA) elect a board of directors who, in turn, hire staff to run the FSA. They are established at the community level and are owned by members of the community.

FSAs offer services in savings, credit facilities, payment services, money transfers and insurance to the poor. In the East Africa Dairy Development (EADD) project, FSAs have been important in providing small-scale farmers with loans to help them engage in productive activities or expand their dairy businesses.

The benefits of FSAs within the dairy hubs include:

• Enhancing member’s ability to deposit and save milk proceeds.
• Reducing the cost of banking by providing a first level of access to financial services. Most dairy hub members cover an average distance of 20-40kms from their farm to the nearest major bank, posing difficulties in terms of transportation costs and amount of time wasted. FSA’s alleviate these difficulties, saving farmers time and money spent while trying to access financial services.
• Enhancing member’s borrowing capacities and access to credit, enabling farmers to grow their businesses.
• Offering a range of financial products in addition to savings and lending. These include bankers checks, cash transfers, fixed deposit accounts, microfinance products, standing orders, checking and ATM accounts and Mpesa agency.
• Providing a source of wealth and income to its equity owners in the form of dividends.
• Increasing community development by creating jobs and participating in community projects.

As a small-scale farmer supplying milk to Tanykina Dairy Plant, Joyce has experienced firsthand the benefits of a thriving milk economy stimulated through Tanykina’s partnership with Heifer International’s EADD project. Kina FSA is a subsidiary of the Tanykina dairy plant, and offers banking services to smallholder farmers in the surrounding area. Kina FSA also offers access to Masomo loans (educational loans) through a credit facility, ensuring that Joyce’s children can attend school uninterrupted. Prior to the bank and Heifer intervention, many farmers would sell their cows to raise money for school fees. “We were never moving forward,” Joyce said. “From my milk salary, the bank does monthly deductions as my savings. I only withdraw when schools reopen.”

Imagine this: 3000 farmers living in a rural dairy community agree to each save $7 once a month. By the end of the year they will have saved $252,000. That may not look like much, but what if the cash is ploughed back to build infrastructure for the under-developed community? Productivity-enhancing farm inputs, pay school fees, build new shops, buy a TV, and building a house are just some of the options. This is the vision that drove Heifer International’s EADD project to embrace and promote the idea of village banking. The Kina village bank has been a particular success of the project. The bank was started three years ago by the Tanykina Dairy Plant, a partner cooperative of EADD, which collects and sells milk to major dairy processors on behalf of over 3000 farmers in the area. The dairy manager estimates that the presence of the bank saves the community at least $252,000 annually. The dairy manager explained that in the past, farmers would spend $7 on transportation to the nearest financial institution. 3000 farmers spending $7 each a month is $21,000 spent accessing financial services. Now the amount farmers would have spent traveling is being put back into their own farms and the community.

The Kina village bank is only one of the banks that have been opened in Kenya. Kabiyet village was another location that prospered from the opening of their village bank, shown in the photo to the right.

Bank manager Jasper Lagat says the Kina village bank has grown from an initial membership of 280 to 7000 members spread across different villages. The bank disburses an average of $152,941 to $164,705 to farmers per month. One of the key contributions of the bank to the community is assisting farmers with accessing farming implements through a credit check off system. Additionally, farmers are building financial literacy through training during field days. Its products and services to customers include the popular Masomo Savings account that gives farmers special rates so they can save for their children’s school fees. It also offers junior accounts that encourage children to open savings accounts to help pay for school. This encourages a saving culture. The success of Kina is replicated in 13 other fully operational FSA’s established by EADD. It is estimated that the FSA have a combined total shareholding of over 15,000 farmers. Kina FSA has created jobs locally, employing 22 professionals from the surrounding area.

The Kina FSA has completely transformed the Kina village community, allowing for children’s school fees to be paid and farmers to multiply their crop production. Villagers like Joyce Keter can now earn and save money without traveling long distances, accessing financial services right in their own backyards.