|Sustainability of Micro-enterprise Credit Schemes in Kenya's Informal Sector (K-REP, 1993, 14 p.)|
|2. THE K-REP MINIMALIST GROUP-BASED CREDIT AND SAVINGS PROGRAMMES|
The essential feature of the K-REP minimalist model is a two tier group formation and group guarantees for the individual loans to other members. Members are drawn from the lowest class of active entrepreneurs with assets of less than KShs. 100,000 and employing less than 5 employees. Groups of five people (not related) self-select themselves to form a what are known as Watano groups. Six Watano groups constitute what we refer to as a KIWA (Kikundi Cha Wanabiashara) which has 30 entrepreneurs. Each KIWA meets once a week to transact, savings, loan disbursement; repayments, to discuss loan application and exchange information. A membership fee of KShs. 100 is levied and a further loan application fee of KShs. 100 is charged for every loan application. After 8 weeks of regular savings, 18 of the 30 members are entitled to a loan, and the remaining members receive their loans four weeks later. Loans are to individuals repayable weekly over 52 weeks at interest rates of 27% on declining balance. K-REP provide a maximum first loan of KShs. 10,000 going up to KShs. 15,000 with the second loan and KShs. 20,000 for a third loan. Loans in arrears for four consecutive installments are considered to have defaulted.
Each KIWA has to register as a social welfare group with the Ministry of Culture and Social Services and open a bank account in which they deposit their savings. Each KIWA selects its officers and draws up its constitution or set of rules, take minutes of weekly meetings and keeps a record of savings and repayment transactions as well as banking the loan repayments and savings. The group also undertakes loan appraisal assessing the merit of the loan on both character of the applicant and the business. Groups take collective responsibility. Attendance of meetings is compulsory with fines imposed for non-attendance and late attendance.
Savings mobilization is an integral part of the programme and compulsory saving of KShs.50 per week per member are collected at the weekly meetings. The savings are deposited in a bank where they stay as collateral, forfeitable in the event of default.