Billion-dollar credit network established by unbanked individuals in Kenya
In Kenya, grassroots communities in informal settlements are making significant strides in financial inclusion by creating and utilising their own financial systems. These innovative approaches offer essential support for thousands of unbanked Kenyans who have traditionally been excluded from formal financial services.
## Community-Based Financial Systems
One such example is Sarafu-Credit, a mobile-based community currency system launched in 2015 by Grassroots Economics. Sarafu allows residents in informal settlements like Kibera to transact without Kenyan shillings, using paper vouchers and USSD mobile wallets accessible on basic phones. The system employs trust-based group lending similar to microcredit models like Grameen Bank, promoting local adoption and financial inclusion.
Another impactful initiative is the billion-shilling credit systems, which enable thousands of Kenyans in informal settlements to borrow and save billions. This trend underscores a shift in financial access, making it possible for unbanked individuals to engage in financial activities beyond traditional banking.
## Use of Technology
Technology plays a crucial role in these grassroots financial systems. Mobile money services, such as M-Pesa, have significantly improved access to financial services in Kenya, facilitating transfers and payments. The use of USSD codes allows residents to access financial services on basic phones without internet, making it inclusive for those with limited access to smartphones.
## Challenges and Opportunities
While these innovations offer promising solutions, challenges persist, including limitations in scaling and integrating these systems into broader financial networks. However, these community-driven financial systems offer insights into how decentralised and inclusive financial systems can be developed, potentially serving as models for other regions facing similar challenges.
Shofco Sacco, a community cooperative, is one such success story. In less than 10 years after its inception, Shofco Sacco has grown to Sh 1 billion in assets and disbursed over Sh 800 million in loans. The Sacco's focus on member education and digital platforms is improving risk controls and reflecting the needs and aspirations of its members.
Shofco Sacco's Chairman, Kennedy Odede, believes the Sacco's growth shows grassroots communities can build disciplined financial systems without relying on traditional banking. Odede, who is also the founder of Shofco, states that Shofco Sacco is "banking the unbankable."
The national ranking of Shofco Sacco as number one among community-based cooperatives in Kenya further underscores the effectiveness of community-based financial institutions. Despite many members lacking stable incomes to guarantee loan repayments, Shofco Sacco's credit management systems have enabled growth while meeting members' needs.
Financial Sector Deepening Kenya reports that financial inclusion rose slightly from 83.7% in 2021 to 84.8% in 2024, but growth has plateaued. However, the success of Shofco Sacco challenges the notion that lending to people in informal settlements is too risky. In 2025, Shofco Sacco earned seven national awards during the Ushirika Day.
These grassroots financial systems demonstrate the resilience and adaptability of communities in Kenya's informal settlements, offering paths to financial inclusion without relying on traditional banking structures. As these systems continue to develop and grow, they may provide viable solutions to financial exclusion in other regions as well.
The grassroots financial system, Shofco Sacco, operating within the informal settlements of Kenya, has grown immensely, reaching a billion shillings in assets and disbursing over 800 million shillings in loans. This community cooperative, focusing on member education and digital platforms, is even ranked as the number one community-based cooperative in the country.
The success of these community-driven financial systems, such as Shofco Sacco, is evident in their adoption of technology like mobile money services and USSD codes, making financial access possible for those with limited smartphone access. These systems also promote personal-finance management, serving as a promising alternative for those traditionally excluded from formal financial services.
