Informal savings group in Tarime district, Tanzania. Photo: Daivi Rodima-Taylor
Self-help groups can be found in many areas of Africa—including the chama groups of Kenya, isusu of Nigeria, and stokvels of South Africa (Ardener and Burman 1995). Their customary rotating credit arrangement is also popular among African diaspora communities (Hossein 2018; Ardener 2010). A significant rise has occurred in these groups at the wake of the neoliberal restructuring reforms of the 1980s-90s, with a decline in formal sector employment and state-funded producer cooperatives. At present, these mutual support groups are targeted by FinTech platforms as well as conventional banks with various financial products and software apps. My recent research explores of the contentious interplay between the formal and informal finance in these emerging digital interfaces in Africa. It studies the intersection of FinTech with the social economies of African mutual help groups in Kenya and South Africa, situating this dynamic in longer-term colonial legacies and present-day policies of extractive financialization (Rodima-Taylor 2022).
Informal mutual support groups with their saving-credit patterns have long served as an inspiration for the development industry. The initially successful Grameen micro-finance model drew on pre-existing reciprocities and mutually negotiated liability in largely informal contexts. However, as the microfinance formula shifted from socially situated lending towards ‘fast-scaling’ and universalizing group lending in an expanding range of localities, the industry was faced with repayment crisis (see Haldar and Stiglitz 2016). The recent conceptual shift from microfinance to digital financial inclusion foregrounds mobile payments and fee-based service delivery, with payment industry also experimenting with new sources of value such as customer data (Maurer 2015). Microloans have remained an important part of the digital financial inclusion enterprise, with poorly regulated lending apps fueling over-indebtedness. As informal savings groups and mutual support associations have become central in the livelihoods in many low-income communities, I suggest that more attention is needed to the intersection between the self-help groups and FinTech initiatives in the global South.
Local Economies of Self-help
I suggest that these networks of mutuality should be explored as situated in local economic histories and social structures, but also as embedded in broader political economies. As my earlier three-year ethnographic fieldwork in northeast Tanzania revealed, a variety of self-help groups have become widespread among the Kuria people (Rodima-Taylor 2014, 2013). These built on the norms of cooperation that had emerged in the distant past for sharing agricultural labor, but were also active in non-agricultural ventures such as carpentry, brick-making or tailoring, managed a farm plot or retail kiosk, and frequently had a rotating savings arrangement. The groups provided new opportunities for women and young people marginalized from the traditional men’s sphere of cattle wealth. Group contributions also mediated transactional cycles relevant to social reproduction, such as bridewealth contributions, and marriage and funeral ceremonies.
Similar self-help groups (locally called chama) are proliferating in neighboring Kenya. The savings groups are widespread among both genders and many of them also manage joint business projects (Mwangi and Kimani 2015; Nyataya 2016). It is estimated that one in three Kenyans belongs to a chama, and many are members of several (Gichuru 2014). Such groups are also widespread in South Africa, where informal savings groups (called stokvels) emerged in the era of colonial displacement. In 2019, 10 million people saved through stokvel groups and 45% of the population belonged to an informal burial society (Shipalana 2019). It is estimated that there are over 800,000 active stokvel groups in South Africa.
I suggest that the evolution of informal savings groups should be seen in the light of the legacies of colonial extraction in these historically ‘white settler’ societies. Stokvels emerged with the labor migration of many Black South Africans to the country’s gold and diamond mines in the early 1900s, then spreading with the urban migration of Black women as domestic and industrial workers. The groups provided economic security and quasi-kin networks for the labor migrants. The proliferation of informal saving groups in Kenya can similarly be viewed as embedded in the colonial legacies, such as appropriating land and labor by the British East Africa Protectorate. The legacies of labor appropriation did not disappear with the end of the colonial rule: traditional forms of harambee self-help were politicized and scaled up for large public works. In the aftermath of the neoliberal restructuring reforms of the 1980s-90s and with a decline in formal sector employment and marketing, people increasingly sought to regroup into small, informal collectivities—chamas (Kithinji 2019; Ngau 1987).
Plural Infrastructures of Digital Finance
Informal means of financial access continue to flourish in the economies of both countries. Mobile money—a mode of formal financial inclusion—features as a central means of mediating payments in informal social networks in Kenya, helping people to deal with financial needs and emergencies. While there exist some banking products oriented towards savings groups, these often encourage substantial group deposits with a goal to apply for formal bank loans, and appear in tension with the nature of chama groups where loans are seen as flexible and interwoven with diverse livelihood domains and activities. The mismatch between the practices of these informal groups and formal banking has not disappeared with the digital advent. An increasing number of FinTech firms, sometimes in partnership with Kenyan banks, are working on digital solutions for chama groups. At the same time, there is evidence of a continued importance of offline activities and social networks in the new digital finance space in Kenya. FinTech initiatives such as digital crowdfunding rely on multiple channels and diverse modes of communication, combining in-person funds mobilization, bank-based and mobile payment, social media, and instant messaging (Chao et al. 2020).
In Kenya, FinTech has brought along an overabundance of poorly regulated digital credit and resulted in extensive blacklisting of defaulting borrowers. Digital loans are based on automated eligibility decisions, frequently relying on data scraped from borrowers’ phones and social media. Digital credit uptake has been higher among casual workers in the informal sector (Gubbins and Totolo 2018). Digital solutions for chama groups could easily become another step in that progression.
It is significant that many of the digital solutions in the country leverage mobile money, largely supplied by the leading mobile telecommunications provider, Safaricom. While mobile money and its providers are central to Kenya’s FinTech platform economy, mobile money itself is heavily dependent on cash and on institutions mediating it, such as informal savings groups as well as mobile money agents who often work part-time and underpaid. FinTech platforms in such markets thus depend on diverse peopled infrastructures, leveraging and possibly expanding economic informality and underpaid labor.
This calls into question the assumption that FinTech in Africa advances inclusion in formal market spaces. Instead it could be seen as producing new hybridizations of informal and formal, and inclusion and exclusion, in local financial practices. New financial technology companies build on consolidating and transforming existing market structures due to rapid scaling and network effects, with developing oligopolies changing the competitive basis of retail finance (see Langley and Leyshon 2020). FinTech initiatives in Kenya build on the mobile money platform M-Pesa, often exposing savings groups to poorly regulated digital loans. In South Africa where mobile money platforms play a significantly smaller role, formal inclusion is mostly bank-based, while also utilizing retail stores and funeral insurance companies as points of contact with low-income consumers. Many formal sector initiatives seek to offer various loan and investment products to the groups. As stokvels have emerged as a means to juggle economic insecurity, attempts to adjust them to investment purposes have seen limited success. The platformed economy of FinTech in South Africa that increasingly seeks to connect stokvels with diverse private-sector lenders and investment funds may potentially expand over-indebtedness in the communities long disadvantaged by apartheid-era inequalities.
Efforts to formalize these groups in both countries have largely been limited to group bank accounts, geared to mobilize savings to apply for bank loans oriented towards ‘productive’ investment. Informal savings groups that functioned as important collective risk management devices have therefore been increasingly subjected to indebtedness to formal finance. In both countries, people perceived debt from mutual help groups differently from formal sector debt. While the latter was viewed as an indicator of poverty, the same amount of debt from a savings group was often seen as social investment. All the while, savings groups in both countries were shaped by colonial legacies and enduring racial and economic inequalities that forced people to turn to these local inventions to balance their meager and irregular income.
In both cases, FinTech has not eliminated reliance on cash. In Kenya, the network of agents and cash-out points is likely to grow with the scaling of mobile money as it is integral to emerging FinTech initiatives. In South Africa, cash remains important in low-income communities as stokvels operate heavily in cash. Similarly, the virtual medium is unlikely to completely replace in-person meetings as oral negotiation of group affairs remains an important feature. The FinTech platform economy in such contexts builds on existing infrastructural elements such as mobile phones and local retail outlets, but is also dependent on diverse peopled infrastructures, such as informal savings groups, and mobile money agents with their support networks (see also Rodima-Taylor and Grimes 2019).
With the rise of FinTech platforms that leverage universalizing group templates, an increasing standardization of the ties of mutuality in savings groups may occur. The informal groups could become more vulnerable to expensive credit offerings by ‘virtualizing’ their group management. Digital group management systems could facilitate the access to these institutions by ill-regulated lending apps, further commercializing their social purpose. The peculiar constellation of private capital and financial technology around digital platforms may facilitate the appropriation of these social networks for private profit, with local cosmologies of mutuality recruited for another round of instrumentalization for governance.
All the while, the resilience and adaptability of the informal savings groups may also offer hope for positive solutions. Inventively adapting traditional forms of labor cooperation to changing circumstances, the groups could be viewed as another expression of African technology innovation and creative resilience. While Africa’s FinTech enterprises face numerous challenges in the global marketplace dominated by the ideals and norms of the Silicon Valley, more attention is needed to local innovative start-ups and locally inspired solutions at the burgeoning technology hubs across the continent. And more context-specific analysis of the local informal economies would help us avoid the reification of ‘self-help groups’ as a novel development tool of the digital era, and as a panacea for the widespread exclusion low-income communities from salaried employment and fair financial access.
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Daivi Rodima-Taylor is a social anthropologist, and researcher and lecturer at the African Studies Center of Boston University. Her research interests include financial inclusion, human economies, infrastructures, and land. She tweets at @DaiviRTaylor.