Integrating Financial Services into Poverty Reduction Strategies; The Case of KADET Ltd Nairobi, Kenya. ECONOMY Economy on a recovery path since 2002 GDP expanded by 5.8 percent in 2005 compared to 2.8 percent in 2003 Total export earnings in 2004 recorded 17.3 per cent growth.
Economy on a recovery path since 2002
GDP expanded by 5.8 percent in 2005 compared to 2.8 percent in 2003
Total export earnings in 2004 recorded 17.3 per cent growth.
Value of imports grew by 29.6 per cent.in 2005
Real GDP growth is forecast to accelerate to more than 6% in 2006Macro Background
a) The informal system, which is not regulated and not subsidized and driven social coping mechanism; limited economic empowerment possibilities.
b) The formal, previously subsidized system. The MFIs are under this category are mostly not regulated and have an emerging challenge in raising capital; limited outreach
c) Member based, with/without regulation; occasional management challenges ; SACCOs
d) The formal, non-subsidized system, regulated, big time business, but missing low income clients in rural agricultural countrysideBackground
Operates as an MFI firm and is a wholly owned subsidiary of World Vision in Kenya
Incorporated in on June 2001:
Presently operates in 35 Sub Offices with a dominant rural an agricultural presence
Has seven Branches/Areas Rural Market Focus
Currently Serving 25,000 active clientsBackground and Context
KADET IdentityKADET lending business is based on conventional best practice BUT innovative and pro poor lendingKADET has a strategic direction to lend to rural and agricultural \clientele a s a distinct business segmentKADET therefore uses group methodology as its means of outreach
KADET uses group based methodology expressed in two branded methods:
Solidarity Group Methodology
Community “Banking” Methodology
The community banking product is designed to penetrate the rural agricultural countryside that have many infrastructural challenges. Its normally unreached with financial services and generally not attractive to formal financial services
The health insurance product is a package designed to enable individuals within the low income familles to access quality health care services, who own cannot afford conventional hospitalization insurance covers.
This is a product whose innovation is a major departure from the conventional practice in Kenya where insurance companies and ‘HMOs’ access health covers to the middle and higher tier of the society
The package is made possible by KADET’s partnership with CIC, an emerging e major player in insurance business in Kenya.
Group outreach methodology assures against ‘ adverse selection’
Mkopo Shambani is a loan product designed for for seasonal crop credit that is the mainstay of most rural Kenya. Aims to transform subsistence farming from a social activity into a ‘bankable’ business
The products anticipates a ‘ballooned’ repayment at the end of repayment period and with a distinct market arrangement. Uses farmer associations and groups as the marketing avenues
KADET recognizes the need amongst micro entrepreneurs to acquire business assets i.e. deep freezers, weighing machines, business pay-phones etc. The facility is instrumental to the ADP communities who needs to build their assets portfolio. With this product therefore, KADET offers an opportunity to the customers to acquire essential business assets in an easy way saving them the trouble of looking for other financiers
This product targets customers trading in agricultural produce but with very clear market linkages where their produce is for the market. KADET is partnering with the customers and marketing organizations/agencies for this product.
With this arrangement KADET funds the customers and recover the loan repayment from the customer’s sales proceeds through the marketing body
The livestock product is mainly targeted to the rural pastoralist communities in order to equip them with credit to enable them be cushioned against the middleman. It helps community banks amongst pastoralist to bulk livestock for better market
Embedded in the product is the opportunity to inculcate a culture of saving among the community as a way of equipping them for disaster preparedness
This is a new loan product designed mainly for KADET’s existing customers within the groups
It is meant to address the need prevalent for school fees. It is also meant to reduce loan diversion effects by enabling customers to pay their children school fees with ease, thereby not diverting their business loans to consumer needs
This is a loan product meant to help KADET customers to maximize on emerging opportunities in their business markets. It gives the customers an opportunity to refinancing before the completion of their previous loan
7. Long term commitment by any agency to poverty reduction in a systematic and inclusive manner direction than just return on investment must be the direction for any support