Financial Inclusion of Pastoralists in Kenya


NAIROBI — Islamic or Sharia-compliant banking has been on the rise in Kenya for years. Several banks offer sharia compliant services, and the Kenyan government also supports the sector as part of a strategy to stimulate economic growth and development. By offering Sharia-compliant banking services to the rural population in Wajir, in Kenya’s northeast, the Crescent Takaful Sacco (CTS) aims to enhance the financial inclusion of pastoralists and helps them to cope with the effects of devastating droughts.

Experts hope that the expansion of the Islamic banking sector will attract increased investment from Asia and the Middle East. In Kenya, most service providers reside in the national capital of Nairobi, where they remain inaccessible to the poor, rural population of Wajir county. As Diyad Hujale from the charity Mercy Corps explains, investors usually do not see the county as a profitable business opportunity, since “Wajir is vast and its residents earn very little.” As a result, many Muslims, who constitute a majority of the population in the northeast of Kenya, are still excluded from mainstream financial services due to religious constraints.

Islamic banking gets regulated by the religious laws of the Sharia. Some Sharia laws state interest rates and usury are forbidden, which is why banks operate on a profit-sharing model. Likewise, excessive levels of uncertainty and risk, called charter, are not allowed. Money can also not be invested in businesses associated with gambling, alcohol or tobacco.

The Crescent Takaful Sacco, according to its statements made publicly, aims to enhance financial inclusion of pastoralists and other unbanked and underserved communities in Kenya. Sacco offers Sharia-compliant services like insurance, credit and savings accounts and consumer financing. In cooperation with the Mercy Corps, the CTS opened a branch in the town of Wajir in 2016, as part of the Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED) program.

The residents of Wajir county are currently confronted with an ongoing drought that leaves their livestock without water or pasture. The death of their animals means the erosion of many pastoralists’ livelihood. With the help of the CTS, clients can improve their financial security, and are enabled to invest into new ways of profit-making. Pastoralists can take out small loans during good times, that help them feed their animals in dry periods and thus reduce animal loss.

However, the CTS also grants larger loans to clients with promising business ideas and additionally trains them on topics like accounting. Catherine Simonet of the thinktank Overseas Development Institute (ODI) said that pastoralists are often underestimated in their potential to launch businesses and constitute “a hugely untapped source of investment.” The Thomas Reuters Foundation reported on the story of Wajir resident Humara Hujale, who set up her taxi service with a loan from CTS, which has since enabled her to double her income.

Hujale laments that CTS services are not yet available in the whole county of Wajir. It is expensive for the agents to travel outside of the town to meet with clients, and many pastoralists are constantly on the move. He sees the establishment of an online platform and the use of mobile technology as a possible solution to enhance the financial inclusion of pastoralists further.

Lena Riebl

Photo: Flickr


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