Building resilience through financial inclusion

By Getrude Lung’ahi

Vulnerable communities tend to have little to no access to affordable credit to anticipate and cope with shocks. Pre and post-disaster liquidity is critical for them to protect livelihoods in times of weather shocks.

In Wajir County, Kenya, the problem is compounded by the fact that the predominantly Muslim population lacks access to Shariah-compliant financial services – such as services that prohibit the payment of interest or that aren't related to businesses like gambling or alcohol that go against Muslim beliefs.

As part of the Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED) programme, Mercy Corps supported private sector micro-finance institution Crescent Takaful SACCO (CTS) in opening a branch in Wajir on November 17.

Women at the launch of the CTS Sacco in Wajir, Kenya @Getrude Lungahi

Through this branch, CTS is able to offer customers Sharia-compliant financial services - the first time this has been made available in northern Kenya. In recognition of this important step forward, the launch was officiated by the Deputy Governor of Wajir, Hon. Abdihafid Yarow.

A SACCO is a member-owned financial cooperative whose primary objective is to mobilise savings and give members access to loans on competitive terms as a way of enhancing their well-being.

The SACCO offers savings, lending and investment services based on Islamic principles such as profit sharing in collective ventures.

It provides a range of products that will help the community adapt to shocks such as prolonged drought, that often result in extreme poverty. The products include Ayuta Sokoni, which pools funds from entrepreneurs to support them in various aspects of trade such as re-stocking their products.

Ayuta Al-Rafiq, another product, gets groups of friends to define common economic objectives such as co-investments into businesses and pool resources.

‘‘To date there have been no appropriate Sharia-compliant financial services that serve pastoralists,” said Deputy Governor Hon.Yarow. “CTS brings a new hope, as we now have a SACCO that serves our faith.”

In addition to providing financial services that meet community needs in Wajir, the SACCO will aim to strengthen savings groups and eventually link them to other providers of financial services like banks. Over 3,000 households in Wajir will benefit from the products through the Mercy Corps BRACED programme.

‘‘My dream has always been to see pastoralist communities access loans in villages to build their resilience – I am glad to be part of the process,’’ said Diyad Hujale, Mercy Corps programme coordinator and learning manager for BRACED.

CTS SACCO are providing relevant financial services to communities and have designed products like Mifugo Kash Kash, that financially empowers small-scale traders to purchase livestock from farmers.

This gives them access to markets outside Wajir County and boosts their income, while mitigating the impact of weather shocks on livestock.

Fatuma Kosar, a pastoralist from Wajir, added that ‘‘CTS SACCO will enable women to access more funds beyond their existing savings groups.”

“It gives us an opportunity as women to start small businesses since we can now access more funds. We will become independent.”

The next challenge for financial institutions will be to devise innovative financial products to suit women’s needs. This effort ranges from providing women with valid ID cards and enabling them to independently open a bank account, to start new activities that will boost their income.

Article originally published at Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED).