Equity Bank was cited in a study by the International Finance Corporation (IFC) as one of the financial institutions that are pushing for financial inclusion for the residents of Kakuma. The study conducted by IFC dubbed “Kakuma as a Marketplace” was meant to drive economic empowerment by tapping into the opportunities at the expansive Kakuma refugee camp.
The report stated that Equity was the only bank with a branch in Kakuma refugee camp. To open an account, the residents need an alien card or proof of registration document from UNHCR and Refugees Affairs Secretariat (RAS). The study found that access to basic financial services was crucial for personal security and entrepreneurship. The business model used by Equity Bank involves;
- Offering credit to host and refugee communities through Equitel, a sim-based platform. Regular loans do not target refugee camps.
- The bank also offers credit to refugees in partnership with NGO’s. They then select beneficiaries, disburse funds, and manage the loan on behalf of Equity Bank.
This is a crucial need for the residents in the camp and in the town. This is because 99% of the residents in the camp and 95% of those in town lack access to capital to start and grow their business. Driven by its agency business model and mobile money platforms, the bank has been an enabler for entrepreneurs in the region to access formal financial services. This has come to help the bank reach even remote locations without the costly investment of brick and mortar shops. The use of Equitel lines has also been of great help, as the community can access mobile loans when they open an account and they are issued with the Equitel SIM cards.
Additionally, the issue of collateral which may not be available to these residents has been resolved by using alternative credit ratings. These include M-PESA transactions or savings account history. Low access to credit and informal lending mechanisms makes Kakuma the place to be for financial institutions. The residents in town are more likely to use the loan for education or a business investment. Those in the camp mostly borrow money from local shops to buy food on credit.
The demand for credit is really high but the market is really informal. Most refugees get credit from family or family members. They borrow amounts ranging from Kshs 1000-Kshs 8000. The people in these areas consider access to capital to be the main constraint to business growth. While Equity Bank does not lend directly to refugees, it partners with NGOs. They then select beneficiaries and provide the funds, while Equity Bank holds the account and disburses the loans. The Bank also supports traders and uses inventory as collateral.
The study also highlighted the challenges that the private sector engagements can address. The idea was to promote self-reliance and socio-economic integration between refugees and host communities. This was done in a bid to empower them. Attracting new private investors could also provide long-term solutions for refugees. They could get the support to run their local businesses thus increasing work opportunities.
The study showed that residents of Kakuma camp and town struggle with basic financial concepts. Almost a third of respondents among refugees admitted to never having heard the word ‘bank’ and 62 % the word ‘interest’. 52% have never heard of mobile money and 57% have never heard of mobile banking. Equity has been of great help with this issue through offering financial literacy programmes to the residents thus they are able to understand how to use a range of financial services such as savings, bookkeeping and credit products.
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