Safaricom Foundation’s Sh20m fund for the unbanked creates overnight rural entrepreneurs

Safaricom Foundation Chairman Joseph Ogutu handing over a gift to Hellen Akumu,the treasurer of Kangeso Self Help Group in Rongo Constituency,Homa Bay County on 19th August 2016 during the official visit to Safaricom Foundation sponsored projects in conjunction with Hand in Hand Eastern Africa. [PHOTO:JAMES WANZALA/STANDARD]

The Safaricom Foundation (SF) has been giving grants to various social sectors the last 13 years.

In July last year, however, the foundation decided to target the unbanked, who are mostly in rural areas and lack access to credit from banks.

“Over the last three years, it became very clear to us that we need to make a contribution towards economic empowerment,” Joseph Ogutu, SF’s chairman, said.

“We also realised that our people need to develop the habit of saving and be able to borrow and invest in their businesses.”

The foundation partnered with Hand In Hand Eastern Africa (HiHEA) to advance loans to groups to start small businesses. The project targets unbanked Kenyans aged 18 and over with no access to micro credit.

“Through the testimonials in this first phase, we have seen that it is indeed changing lives and we will have to roll out other phases,” said Mr Ogutu.

The project’s pilot phase is being implemented in 12 counties through five participating HiHEA branches.

SF set aside the Sh20 million microloan product in its strategic plan for April 2014 to March 2017, with the aim of supporting the establishment of micro and small-scale enterprises that have social impact and create jobs.

HiHEA mobilises, trains and prepares the beneficiaries to access loans from SF, which range between Sh10,000 and Sh30,000, and are payable in three to 12 months. The financing is disbursed through mobile phones.

HiHEA also ensures project participants save adequate proceeds from their businesses through table banking and merry-go-rounds, systems that they can later use to access loans for expansion.

“We realised that lack of knowledge on how to use the funds is the root cause of the failure of many start-ups – not access to funding. This is why we build capacity by training groups on six areas of savings, resource and group mobilisation, enterprise development, financial management, value addition, and marketing linkage and focus on the environment,” said HiHEA CEO Pauline Ngari.

Ms Ngari believes that if groups are economically empowered, they could become like banks and start lending to other people, boosting financial access.

“I had never handled Sh10,000 in my life, but through the foundation, I was able to handle it. I used Sh6,000 to pay school fees and invested Sh4,000 in second-hand clothes, which I sell at a small profit to pay off the loan,” said Pamela Atieno, a member of Kangeso Self Help Group in Rongo Constituency.

The group was set up in July and has 40 members. It has since bought 200 plastic chairs and four tents for hire.

Revolving fund

So far, out of the Sh10 million granted to HiHEA, 70 per cent has gone towards a revolving fund for microloans, with 30 per cent spent on group mobilisation and training.

So far, the partnership has led to the creation of 1,921 enterprises and 2,497 jobs.

HiHEA has also trained 142 groups with 2,700 members, and disbursed 700 loans valued at Sh7 million.

According to the Economic Survey 2016, Kenya’s financial exclusion stands at 17.4 per cent, while the percentage of Kenyans who rely solely on informal service providers has dropped from 32.1 per cent in 2006 to 7.2 per cent in 2015.

However, women still have lower access to formal, regulated service providers compared to men. Further, their reliance on groups is far higher at 51.4 per cent than men’s 30.9 per cent.