Building Inclusive economies from below
Grassroots Financial Innovations
The Challenge
With over half of the world’s population now living in cities, and 90% of urban growth taking place in low-middle-income countries, there are more than 828 million people living in informal settlements.These areas are characterized by poor basic services, deficient infrastructures, high unemployment rates and scarcity of money.
An extensive informal sector of self-help groups (“chamas”), resident associations, cooperatives and micro-entrepreneurs provide critical services such as water, sanitation, energy, transportation or waste collection.These become one of the few options for a livelihood in urban informal settlements.Yet, owning few assets and with no access to established financial institutions nor markets, micro entrepreneurs in the settlements have few alternatives to free themselves from the level of extreme poverty in which they live.Their income hardly covers their livelihood costs, and their saving capacity is almost inexistent.
The solution
Grassroots financial innovations
As a response to economic and financial hardship, a variety of citizen groups are experimenting with a wealth of grassroots financial innovations. Grassroots innovations build on the idea that vulnerable people hold the key to their own solutions.These initiatives focus on mobilizing local resources, designing governance structures, and developing local investment that empower the community. Community currencies have emerged as a grassroots innovation for economic growth.
Developed bottom-up by grassroots entrepreneurs in collaboration with community and cooperative groups, community currencies are inclusive economic tools to expand local markets in informal settlements, create networks to provide critical services, and build bridges between the community and local government. In this doing, community currencies contribute to retain resources locally while incentivizing community investment. Community currencies, that is, suggest a novel monetary infrastructure for communities with lack of access to conventional money.They are, too, indicating a novel route for grassroots participation in sustainable economic growth.
Research Methods
From Mombasa and Nairobi to Kisumu
Kenyan communities in Mombasa and Nairobi have been leading the creation of grassroots monetary schemes in Africa since 2011. Since the fall of 2018, these communities are moving from paper-based to crypto-based community currencies, thus offering significant historical experiences from which to conduct research on this field.The research project will learn from the experiences of the currencies in Mombasa and Nairobi and, adopting a participatory action research approach, translate those lessons to the introduction of three community currencies in the informal settlements of Kisumu. In this doing, we will develop theory on institutional arrangements and practices related to the effective governance and management of grassroots innovations for inclusive economic growth in general and community currencies in par ticular.
The Research
Grassroots financial innovations for inclusive economic growth
Informed by the case of the Kenyan community currencies, and bringing together monetary, urban and grassroots innovation studies, the project investigates 1. the practices of grassroots financial innovations; that is, how they are organized and governed; 2. the impact of the monetary designs and governance rules on the sustainability and inclusiveness of the local economy so developed; and 3. the diffusion strategies used by grassroots innovations in their encounter with established institutions.Thus, the research project offers an interdisciplinary perspective on the issue of organizing resilient and inclusive local economies. This is relevant not only for Kenya but also for informal settlements in other African cities.
Before we started accepting Sarafu (Community Tokens) as a complement to the Kenya shillings, I would admit very few students in my school because many parents could not afford to pay 200 shillings tuition fee per month but since we started accepting Sarafu as fees, I have admitted tripple the number I had.
Hatching ideas that stimulate the local economy
