Kenya's slum vendors rely on savings groups to survive COVID-19

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Mercy Akinyi waiting to serve customers at her retail shop in the slums of Kibera, Kenya. Photo by: David Njagi

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Starved of financial reserves to battle emergencies, Kenya's small traders are struggling to remain afloat as the economic meltdown induced by COVID-19 continues to stagnate businesses one year down the line.

The country’s economy was projected to contract by 1% to 1.5% in 2020, and research has found that the limited access to capital for micro, small, and medium enterprises further diminished during the pandemic, as the two sources of credit for MSMEs — financial institutions and suppliers — were affected.

Most financial institutions reduced their exposure to the MSME sector by asking for additional collateral and pricing their loans higher than usual, due to the perceived risk associated with these enterprises. Suppliers are experiencing a decrease in sales, and increased expenses have reduced sales on credit, which many MSMEs rely on. In addition, only 20% of the 7.4 million MSMEs operating in the country are licensed entities with access to mainstream financial institutions.

Faced with these challenges, a growing number of vendors in Kenya's slums turned to credit unions and savings groups, which could provide loans without collateral, to boost their businesses.

"Business has been very difficult since COVID-19 came. There are fewer customers and lesser earnings. But I am not very desperate because I am getting financial support from our savings group," said Christine Awuor, a hairstylist operating in Mathare slum.

Awuor's savings group, formed in 2016, is known as Jirani Moyie and has 25 members. They gather every Sunday to raise funds in what is known as “table banking.” Each member contributes an agreed amount of money, which can then be loaned out within the group.

“The sustainability that our group has achieved makes me feel confident to face the future, however unpredictable it could be.”

— Beatrice Mukami, a retail trader in Kenya’s Mathare slum

Benefiting members can invest the money into their businesses and repay later with 10% interest. The balance remaining after needy members have been served is then deposited into a local bank account, Awuor said.

Savings groups also act as collective collateral, with members able to access financing from some nonmainstream financial institutions. During the pandemic, these groups have been used to disburse grants from organizations such as Shining Hope for Communities, or SHOFCO, a grassroots movement working in Kenya's slums that provides grants and loans to small traders through its credit union.

The SHOFCO Urban Network gives grants of up to 7,000 Kenyan shillings ($70) to small traders in savings groups such as Awuor’s to help their struggling businesses bounce back from the coronavirus meltdown. They are also able to apply for loans without collateral through SHOFCO’s credit union. The only requirement for accessing funding is belonging to a savings group with at least 20 members, as they can vouch for each other, said Program Manager Isaac Gomba.

More than 150,000 slum vendors are part of these savings groups, which were initially established as associations for building social bonds among people living in slums but later evolved to serve their economic needs, he said.

Savings groups have now spread to 17 informal settlements in four counties and have given community members the opportunity to solve their problems on their own, Gomba added.

Now, "the people will not wait for someone to come from outside their communities to solve their problems because they will use the experience that happens within the community to stand for themselves," Gomba said.

Beatrice Mukami, a retail trader in Mathare, received a loan of 30,000 shillings from the SHOFCO credit union to rekindle her business, which faced closure amid the pressures of COVID-19. Using the funds, she has also been able to establish a chicken-rearing business at her home.

Mukami had previously tried to take out a loan from a local bank but was declined due to a lack of collateral, such as a vehicle logbook or title. However, she was able to access funding with support from her Jiweze saving group.

"I feel like I am a part of something with a purpose. The sustainability that our group has achieved makes me feel confident to face the future, however unpredictable it could be," Mukami said.

Mercy Akinyi, a retail trader in the Kibera slum, said that in the absence of savings groups, people in the slums would have turned to informal lenders who accept electronics and other household goods as collateral and provide loans with 30% interest rates and one-week repayment periods.

"A lot of people who go to loan sharks are not trained on how borrowing and lending works,” she said. “They go there to solve short-term problems but end up losing their valuables because they do not take time to understand the conditions put forward by informal lenders.”

About the author

  • David Njagi

    David Njagi is Kenyan journalist with over 12 years’ experience in the field of journalism. He graduated from the Technical University of Kenya with a diploma in journalism and public relations. He has reported for local and international media outlets, such as the BBC Future Planet, Reuters AlertNet,, Inter Press Service, Science and Development Network, Mongabay Reporting Network, and Women’s Media Center.