In Kenya, entrepreneurs, particularly those engaged in agribusiness (agripreneurs), form the bedrock of rural economies. Indeed, at least 70% of rural Kenyans are employed in agricultural value chains, mostly as producers, but also in processing and marketing. Yet even as important as agricultural enterprises remain to the country’s economy, they are majorly underfunded with many unable to secure loans from local financial institutions. Their struggles are worsened by a lack of financial literacy, hindering their ability to make their ventures appealing to investors. Indeed, financially illiterate households face risks such as over-indebtedness and exploitation through borrowing. In this blog, we explore the opportunities for strengthening financial literacy among rural farming households, against research confirming that financial literacy training helps individuals understand risks, make informed decisions, and enhance their financial well-being.
Village savings associations – Encouraging farmers to join village savings associations is essential for bolstering their savings efforts. These associations play a key role in fostering a culture of financial responsibility among farmers. By joining these groups, farmers gain access to a supportive network that enables them to monitor each other’s progress closely. This mutual accountability mechanism both promotes transparency and motivates members to strive for greater financial discipline. Moreover, village savings associations serve as a platform for farmers to share knowledge and best practices related to savings and investment as members exchange ideas on effective saving strategies. Faulu Bank has been heavily invested in training numerous village associations on record keeping and banking strategies for accelerated credit-worthiness. From these programs, many farmer groups have been reached with individual farmers gaining new money skills.
Local market days– In numerous rural regions across Kenya, market days serve as pivotal gatherings where individuals converge, not only to engage in commerce but also to socialize. These marketplaces present a prime setting for financial institutions to capitalize on community engagement and outreach efforts. By strategically leveraging these well-attended events, financial institutions can run activations aimed at spreading important financial literacy messaging while concurrently attracting prospective clients. These activations, from our experience at Faulu, can facilitate meaningful conversations and address common misconceptions or concerns regarding financial matters, and empowering individuals to make informed financial decisions. On several occasions, Faulu Bank has set up activation programs in underserved regions, where populations have on local market days been educated on financial management and financial freedom.
Digital platforms – The pervasive presence of mobile phones in Kenya presents a unique opportunity to foster a culture of savings within rural smallholder households. Leveraging this widespread accessibility, financial institutions like Faulu Bank have developed innovative savings products that cater to the needs of rural communities, where basic feature phones are prevalent. Through the use of Unstructured Supplementary Service Data (USSD) technology, individuals can conveniently access Faulu Bank’s savings services directly from their mobile devices, even in areas with limited internet connectivity. This approach offers several advantages. First, it removes barriers to entry for individuals who may not have access to traditional banking services or internet-enabled smartphones. Secondly, by integrating savings mechanisms into a tool as ubiquitous as the mobile phone, the Bank encourages smallholder households to adopt regular saving habits and invest in their future financial security.
Financial literacy among children– Children are markedly more impressionable than their parents, making them ideal candidates for early education in financial literacy. The cultivation of financial acumen within farming communities can start by instilling these vital skills in schools. Faulu Bank’s innovative children financial empowerment program, the Hazina Junior account, serves as a prime example, introducing children as young as five years old to financial literacy. Expanding this initiative into school programs presents a remarkable opportunity to deepen understanding and foster responsible financial habits from an early age.