ECONOMY-KENYA: AIDS Threatens Small Businesses

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, Mar 25 2005 (IPS) - AIDS is threatening Kenya’s money-lending institutions which are supporting about 16 percent of the country’s 30 million people.

The threat has prompted the management of the micro-finance institutions to begin looking at practical ways of tackling the problem, including taking out insurance to cover clients living with HIV/AIDS.

‘’If you have financed a business and the owner is infected and suddenly they cannot run it because they are too ill, the business will close down. So we are trying to negotiate micro insurance to protect these businesses and meet the medical expenses of the owners,’’ Beatrice Sabana, chief executive of the Association of Micro-finance Institutions in Kenya (AMFI), told IPS.

‘’We are holding awareness campaigns targeting families of those infected to ensure continuity of their businesses,’’ she said.

According to Sabana, stigmatisation has also played a part in closing down businesses owned by people living with HIV/AIDS. ‘’There is a lot of stigmatisation, which contributes to the collapse of businesses of people infected. When people know that one is sick and is running a business, they will stop buying from him or her,’’ she said.

‘’If the sick person wants a loan from micro-finance institutions, which require guarantees, no one would want to guarantee him or her, Sabana added.

Miriam Nyasembo, a mother of four living with HIV/AIDS, has first-hand experience dealing with AIDS-related discriminations. ‘’I was forced to close down my business five years ago because I had no customers coming in. I tried getting a loan from various micro-finance institutions to boost my business but it was impossible because no one could accept to guarantee the loan,’’ she told IPS.

Nyasembo, who was running a food store in the outskirts of the capital Nairobi, now depends entirely on the goodwill of well-wishers.

The plight of people like Nyasembo has prompted micro-finance institutions to embark on de-stigmatisation campaigns.

Official statistics show that Kenya’s HIV/AIDS prevalence rate stands at seven percent, with over 200,000 in urgent need of life-prolonging anti-retroviral drugs (ARVs).

Even though micro-finance bodies are meant to serve those who have been left out of the formal banking system, there is a growing concern that many Kenyans still lack credit facilities. Statistics from AMFI indicate that close to 90 percent of Kenyans lack access to formal banking services. This is because most micro-credit companies are concentrated in cities and towns.

‘’Most of the people who lack credit are in rural areas. The question now is how to put up micro-finance institutions in rural areas,’’ Sabana said. ‘’There is need for appropriate incentives and beefing up infrastructure to woo people into investing in rural areas.’’

AMFI is lobbying the government to establish a policy framework that will encourage growth of this nascent industry. Such a framework, according to the organisation, must have a specific time frame for Kenyans to have access to credit.

The campaign to gain access to credit is top on the agenda of this year’s celebrations to mark the International Year of microcredit. In 1998, the United Nations General Assembly proclaimed 2005 as the international year for microcredit.

The United Nations acknowledges micro-finance as a key instrument to achieving Millennium Development Goals (MDGs), which seeks to reduce poverty by 2015.

Eight ambitious Millennium Development Goals were endorsed by world leaders during a United Nations Millennium Summit in New York in 2000 to end poverty. They include reducing child mortality by two thirds, eradicating extreme poverty and hunger, achieving universal primary education, promoting gender equality and empowering women, and combating HIV/AIDS, malaria and other diseases by 2015.

However, proponents of micro finance maintain that policies geared at ensuring the growth of the sector need legal backing.

Kenya’s cabinet approved the much-awaited Micro-finance Bill, which seeks to provide a legal framework for the sector, only last month.

The law is expected to empower micro-finance institutions to mobilise and protect deposits, in addition to carrying out regular banking duties. Even though these institutions, which include rural and urban savings and credit cooperatives, sit on deposits worth millions of dollars, concerns have been raised over their legitimacy to discharge such duties.

Those advised to deposit their money with micro-finance bodies include pensioners, who require training in saving their pension funds to enable them cope with life after retirement.

‘’Because of the nature of their pension scheme, these people need training. Unless someone has been trained, the money they get in lump-some goes to waste and most of them give up and die just because they do not have other means of sustaining them in their retired life,’’ Caleb Atemi, public relations manager at the state-run National Social Security Fund (NSSF) told IPS.

One person familiar with the mismanagement of pension fund is Rispah Anyanga whose husband retired in 1998. ‘’After retiring as a clerk in one of the accounting firms in Nairobi, where he had worked for almost 20 years, he was paid an equivalent of 1,600 dollars. He put all the money in a hardware business. The business was not doing so well. After three months it closed down. We had no other source of income and had to pay bills like house rent, electricity, school fees, transport, and food,’’ Anyanga told IPS from her home in Kayole, a slum in the outskirts of Nairobi.

She said: ‘’My husband could not take it anymore. He just lost hope and committed suicide three months later, leaving me to take care of our three children who were then all in high school.’’

Under NSSF’s scheme one is given his or her pension in lump-some upon retirement at the age of 55. The amount includes a percentage of returns earned from investments during the period in which contributions are held by the fund.

‘’Most of the time, the money, which can be as little as 533 dollars has not been put into proper use and, as a result, it has enhanced poverty instead of alleviating it,’’ Atemi observed.

Some 56 percent of Kenyans live below the poverty line of less that a dollar a day, according to official statistics.

Experts say if pensioners were trained on how to invest wisely with micro-finance institutions, they would be able to get loans to start up fresh businesses or expand existing ones.

‘’They can get money if they save and invest in business and are able to repay the loans, which are not tied to strict requirements such as collaterals as required by mainstream banks. Micro-finance institutions use alternative collateral mechanisms such as group guarantees and compulsory savings where institutions will lend you a percentage of your savings,’’ Sabana said.