Pilot: Providing Credit For Stoves To Reach the Extreme Poor in Kenya
FSA CREDIT-LENDING PROGRAM PILOT
This year, The Adventure Project is piloting a new credit-lending program to get more stoves to women in Kenya. The goal is to reach over 2,200 women who could not previously afford them.
WHO IS THE CUSTOMER:
These are people (mainly women) who live on less than $1.90 per day.
DOES THAT MEAN THE POOR CAN’T AFFORD THEM NOW?
Nope. Each stove is sold for 1,750 Kenyan Shillings (less than $20 USD) so they are affordable and are in high demand. However, some people who are extremely poor lack savings and are less able to make big purchases. Our hypothesis is that buying a stove on credit will help to reach the “poorest of the poor.”
HOW WILL IT WORK:
The credit-lending program will enable women to receive a new stove on credit, allowing them to pay-off the cost of a stove over a 6-9 month period.
These stoves cook food twice as fast and save half as much fuel as open fires. With the average woman in Kenya walking 4 hours per day in search of firewood, the time she saves can now be used for more productive activities.
HOW WILL THE PROGRAM WORK?
Five FSAs (Financial Services Associations), will be given loans to purchase large quantities of stoves from stove entrepreneurs, like Stephen.
Once the FSAs get the stoves, they will market the stoves to their members and the larger community. While some community members may be able to pay cash upfront for the stoves, the biggest impact will be for members who can’t afford it.
The FSA will be able to loan the stove to the member at a low interest rate of 12%. With the loan, members will pay $22.40 for the stove over 6-9 months - that’s $2.50 - $3.50 per month - making it possible for those who can’t afford to make a $20 investment upfront able to afford it.
WHAT’S AN FSA?
FSAs, also known as Community Banks, are user-owned and user-managed banks (like small scale co-operative credit unions). They operate in areas where traditional banks don’t exist and typically have between 800-1500 members. More than 50% of members and FSA leadership are women.
THE GOAL: A REVOLVING FUND
As loans are repaid, the FSA can use those funds to buy more stoves from the stove masons and loan more stoves to women in need.
WHY PARTNER WITH FSAs?
FSAs have existing networks in the community that they can tap into for marketing purposes. To an entrepreneur, it would be extremely expensive to enter a new community and attempt to introduce a brand new product. By using FSAs, marketing the stoves to 800-1,500 members is easy.
FSAs already offer different types of lending services to members so they have the knowledge and skills needed to run a lending program and collect repayments. The community is also used to using the FSA for this purpose so a new lending program doesn’t require a lot of community education and sensitization.
The goal for the pilot is to establish a successful revolving fund for stove loans, bringing fuel-efficient stoves to more homes and reaching more of the extreme poor.
After a year of piloting the program and monitoring and evaluating the outcomes, we will decide if the fund should be expanded to more FSAs in new regions of Kenya.
We estimate this program will bring 2235 stoves to families in Kenya this year, impacting 11,175 people and reducing CO2 emissions by 16,762 tons.
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