Protecting Consumers and Banking Institutions: Why not both?

Most recently, the Central Bank of Kenya and the Kenyan Bankers Association launched the credit information sharing initiative. The first credit reference bureau, The Credit Reference Bureau Africa Limited, was licensed in February 2010 (44). [1]  Such institutions allow for credit information sharing between financial institutions making it easier for information about clients to be disseminated. The Central Bank of Kenya states that such an innovation will lead to cheaper credit for consumers as “information symmetry lowers the risk premium and search costs loaded in the cost of credit.”  Thus, more consumers will be able to access credit at increasingly affordable rates (45). [2]

 

If such an initiative is made to protect banks, why not create a resource for clients to learn more about their banking institutions, specifically about credit and other financial products?  Such a resource could serve as an educational tool that offers consumers the opportunity to protect themselves and their valuables, save money and access credit at a rate that they can afford through becoming educated about the microfinance industry.  During this project, I inspire to create such as a resource through this consumer manual.

While working to create a consumer education manual, I have learned of another organization that is doing great work with similar objectives. Next month, Microjustice For All, a non-profit organization that provides legal services for low income individuals in developing countries, will launch the Fair Kampaign in Kenya.

Microfinance institutions, lawyers and consumer advocacy groups will meet in Nairobi, Kenya to discuss loan contracts used in the Kenyan microfinance industry to improve upon client protection measures such as debt counseling and to create fair contract guidelines.  I am excited about the opportunity to learn from such an organization that is dedicated to using collaboration between different stake holders in microfinance to improve upon consumer protection for clients.  Please visit http://www.microjustice4all.org/ and http://www.fairkampaign.org/ for more information.

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[1] [2] Central Bank of Kenya. “Annual Report 2009-2010.” Nairobi: Central Bank of Kenya, 2009. Accessed July 15, 2011. http://www.centralbank.go.ke/publications/default.aspx

Why women are the focus of the manual?

Many individuals whom I have met throughout the duration of my project have asked me why the manual is designed to assist Kenyan women. Why are women the target audience and beneficiaries of the manual?

Below I explain the role of women workers in Kenya to justify why educational opportunities and resources, such as the manual, are especially important for this segment of the population.

In Kenya, the labor market is made up of 11.4 million workers. Like many developing countries, the majority of these workers, an estimated 9.6 million Kenyans, earn a living in the informal economy. [1]  The informal economy, defined as small scale, unregistered, unregulated and unprotected income-earning activities (11-12) [2], is the largest sector of employment that supports millions of Kenyan families, particularly in urban areas. Thus, even with an active informal economy, employment security is rare and about 40% of Kenyans are unemployed. [3]  

Informal employment is particularly important to the female workers of Kenya. In fact, 60% of workers in the Kenyan informal economy are women (21). [4] Men in Kenya dominate the formal economy, and even if women participate the majority are employed in the service industry that are low income paying jobs (12). [5] Unfortunately, even with the increase of women employment in the informal sector, “the link between working in the informal economy and being poor…is stronger for women than for men” (14).[6]  

Such a finding could be attributed to the fact that more than half of women workers in the informal economy are wage workers rather than self employed (21). [7] Those that are employed through operating their own small and medium sized enterprises hire less employees and earn almost half as much as men who run comparable businesses (13). [8] Even as women are entering into employment, their “nonmarket activities” remain consistent adding to their daily work load, but such work is not accounted for within daily productivity values. Thus, women are working harder and longer hours more than ever before, but gaining less (13). [9]

As Kenya has unequal opportunities in both the formal and informal economies for females, educational resources for Kenyan women are important as they face many barriers to start and build businesses. As financial exclusion of women has decreased with the expansion of Kenyan microfinance industry, women also need to protect themselves with knowledge of such programs to ensure that they can make an informed decision whether to participate or not participate in microfinance. It is suggested by a publication of the World Bank that increasing access to education among women can led to Kenyan GDP growth (10). [10]

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[1] [3] [4] The United States of America. The Central Intelligence Agency. "Kenya." The World Fact Book. STAT-USA. 2011. Accessed July 26, 2011. https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html

[2] [6] [7] The International Labor Organization. "Women and Men in the Informal Economy: A Statistical Picture.” Geneva: International Labor Office, 2002. Accessed July 26, 2011. www.ilo.org/public/libdoc/ilo/2002/102B09_139_engl.pdf
 

[5] [8] [9] [10]  Ellis, Amanda. Gender and Economic Growth in Kenya: Unleashing the Power of Women. Washington, DC: World Bank, 2007.

Who will benefit from the manual?

The manual will be designed to help individuals, specifically women, who run small and medium sized businesses in the Kenyan informal economy become knowledgeable of the products offered in the Kenyan microfinance industry. Many financial institutions, whether commercial or non-profit, offer loans, savings and insurance for low income individuals, but often the details, requirements and procedures are different.  

East Africa Drought: Did you know?

This post does not concern the progress of my project, but concerns a matter in Kenya that has been covered by most local news sources and around the world.

Did you know that the horn of Africa is experiencing the worst drought in history? According to the BBC, more than 10 million people are thought to be at risk of starvation. Recently, the United Nations declared famine in two areas of Somalia. An estimate of 1,000 Somalis are crossing over into Kenya everyday to escape the consequences of the drought.

As I have been welcomed into communities across Kenya to conduct research and to volunteer, I ask those in my community to support the individuals affected by this drought just as they continue to support me, an individual from your community. As it is pointed out in Kenya, the people affected by this drought could be you or me. We do not choose where we are born, but we can choose to remain vigilant about the plight of others across the world to ensure that we prevent and not contribute to future injustices.

• Please learn more: 

http://www.bbc.co.uk/news/world-africa-14271528 
http://www.nytimes.com/slideshow/2009/09/08/world/20090908KENYA_index.html?ref=famine 

• Please consider giving: 

The Kenyan Red Cross that is currently holding a Drought Response Initiative to raise 1.9 billion (Ksh) to support 1.8 million people. iBelow is a link to a list of organizations published in the New York Times.
http://tinyurl.com/preventfamine