Description

Abstract: Improving access to grass-roots rural savings and credit options has been postulated as an important strategy to improve pastoral risk management in northern Kenya and southern Ethiopia. Therefore, studies of how rural financial organizations actually work helps us understand the problems and opportunities of such intervention strategies. During 2000-01, the author studied the performance of five recently established Financial Services Associations (FSAs) in Marsabit District, northern Kenya. These are community owned and operated entities that receive support in the form of initial physical assets and on-going audit and training services from the K-REP Development Agency (KDA). The five FSAs range from one to three years in age, and together have nearly 1,000 members. To-date, however, per capita savings remain meager. Loans tend to be small and are used to support consumption as well as investment needs of the population. There are also high rates of loan delinquency. Only a minority of FSA members appear to be active in terms of loan acquisition and managing their savings accounts. If FSAs are to succeed in northern Kenya, we believe that more emphasis needs to be placed on: (1) training of FSA staff and shareholders; (2) research on pastoral economic behavior; and (3) bolstering business skills and non-pastoral investment opportunities in the region.