Community Financial Services Associations (CFSAs/FSAs) are model informal village banks that are owned by low income members of a community and serve the same members. Designed in a unique Community Empowerment Model, they are commonly known as Safinas in Kiswahili. Safina is the Swahili word for Ark. The theme is borrowed from the biblical story of Noah. Noah had divine inspiration to build an Ark that would enable the people to survive the oncoming floods.
Today, communities are bogged down by the floods of Poverty, Diseases, Perennial Drought, Unemployment, Climate Change, Poor Access to finances, farm inputs and lack Mechanized Agricultural services. Lack of Investment Capital is still a challenge to most rural communities. These are the floods that ADI CBO has been striving to overcome by building a unique model that is worth more than USD 2,000,000.
CFSAs, like a bank, have front offices, strong rooms and banking halls. They assume a conventional company governance structure where the members hold the supreme authority and are governed by a board of management committees who are elected by the members. Community Financial Services Associations work directly with the rural and semi-urban communities.
The CFSA model borrows many concepts and ideas from many existing financial systems; e.g. the Saccos, Limited liability Companies, Capital Markets Instruments and Principles, Microfinance Concepts and other Informal financial arrangements that the poor people themselves have developed and associated with over time; like ASCAs (Accumulating Savings and Credit Associations), ROSCAS (Rotating Savings and Credit Associations) and Chamas.
As institutions, CFSAs are built around locally available financial resources. These resources are mobilized into share capital and transformed into loan capital from which credit is provided to qualifying members who require it. The CFSA Model also takes much advantage of local customs, knowledge, relationship and solidarity. As a microfinance/banking concept, the CFSA model has the peculiarity of having mobilized its risk capital through issuance of shares.
A share sells at par value of KES 50. Because of high demand for savings services by institutions in rural areas such as primary schools and churches, these institutions also benefit from savings products by joining the CFSAs.
CFSAs are categorized into two, Real CFSAs and Virtual CFSAs.
A Real CFSA is established by at least 250 members. They register as shareholders in the potential FSA, raise a minimum share capital and acquire/rent a premise from where they operate.
A Virtual FSA is established by at least 100 members clustered in a minimum of five (5) groups. They register as members and operate as branchless banks. They take advantage of mobile money technology to freely transact without necessarily having the need of owning or renting a building. They are virtually coordinated from a central point i.e. the head office. In most cases, virtual CFSAs are seeds of real CFSAs and are granted autonomy at the point where they attain operational self-sufficiency.
ADI CBO operates at the apex to provide management and advisory services that enable the CFSAs become more responsive to their members’ needs. The organizational model is sustainable since the governance mechanisms assume an institutional rather than a project dimension. ADI CBO’s existence at the umbrella level ensures continuity of good governance and management. In principle, individual and corporate members provide the core capital for the CFSA. The CFSAs further provide the core capital for ADI CBO through monthly subscriptions. This essentially translates into an indirect ownership of ADI CBO by the primary members who are the principle investors at the CFSA level.
Further, this program is modelled on an institutional framework and community banking concept whose financial sustainability is proven. Overall, ADI CBO targets to incubate the CFSAs and supporting pillars as seeds of a formal regulated organizations.
Structured investments towards pillar activities are geared towards transformation to designated institutions with specific roles of serving the members’ diverse needs and ultimately formalize ADI CBO as a holding/group company.
This shall transform social capital into real investment capital as rural communities shall have the opportunity to invest by pooling their resources together hence the slogan “For the people, by the people”. This should be one of the best attempts to reduce the gap between the rich and the poor (SDD 10) and a good strategy for reducing regional capital flight since most financial institutions are owned by the rich and are domiciled in the cities and big urban centres.
ADI CBO, has, over time remodeled the CFSA model that was initially developed by KREP Development Agency through the support of Plan International and DFID in the late 1990s. CFSAs have undergone a lot of metamorphosis from mere Rural Access to finance models to become integrated holistic community empowerment hubs that support the rural communities through a multi-dimensional approach that addresses Access to Finance, Food Security, Housing, Natural Resources Management and Socio Cultural Enhancement and Integration. These are critical interventions that directly affect the lives of the low income earners in both rural and semi-urban settlements.