Enhancing livelihood resilience in Makueni county, Kenya: the role of informal credit in smallholder farming

Due to land degradation, growing population pressures, and frequent drought, smallholder farmers in Kenya’s food insecure drylands are struggling to meet production objectives while maintaining a diverse set of crops to support health/nutrition. In the Eastern Province’s semi-arid region of Ukambani more specifically, these factors are compounded with soil erosion and climatic variability, making any level of commercial farming a precarious venture. Bearing this in mind, most lending institutions in this area consider financing smallholders to be a very high-risk game. Moreover, developing sources of credit that are consonant with smallholders’ seasonally-dependent needs is also not always very profitable for the lending institutions. In the same way, the farmer’s perspective tells us that the transaction costs and added fees associated with traveling to a lending institution, submitting a loan application, and waiting for it to be processed are simply not congruent with the enormous time and money constraints that are central to any agrarian lifestyle. Still, chronic food insecurity is a particular feature of the smallholder livelihood system in Ukambani which layers urgency on top of an already pressing set of credit needs. Smallholder credit needs are unique in that they generally require smaller amounts of money (by most standards, “microloans”) more frequently albeit erratically, and lending institutions often do not or cannot meet these needs in a cost-effective way. With this in mind, this research is one response to the question of where these farmers turn for credit in a time of need, and how credit offers the smallholder some predictability amidst a very unpredictable and challenging environment. In this paper, I argue that credit enhances the resilience of the smallholder livelihood system by helping farmers absorb shocks. I describe the financial landscape of my fieldsite of Makueni County, Ukambani, typologizing the formal and informal sources of credit that are theoretically available to farmers. More specifically, I review the reasons that smallholder farmers are statistically less likely to turn to formal lending institutions and focus on the strengths of the informal group lending structure (chama in Kiswahili or mwethiya in Kikamba), which ethnographic evidence shows is an incredibly reliable, adaptive, and popular source of credit. In doing so, I demonstrate the ways in these groups allow Kamba farmers to transact using a variety of media (e.g. social capital, material goods, knowledge/skills, cash) that all bear similar value. Employing Jane Guyer’s (2004) concept of convertability, I argue that this broader interpretation of value and credit allows these groups to resist being vulnerable to fluctuations in cash flow or shortages in food, for instance. Because credit and debt are inherently linked concepts, I also focus on the metaphysical state of indebtedness and the various interpersonal obligations that define human social life. I use ethnographic evidence to show that incurring debt to another person (rather than an institution) strengthens one’s capacity to respond to risk and unpredictability. There is nothing binding a person to an institution apart from coercion, while interpersonal debt is grounded in other forms of obligation that bind people together. I use Parker Shipton’s (2003) concept of entrustment and Janet Roitman’s (2003) idea of debt as “unsanctioned wealth” to develop the idea that debt is actually a productive feature of smallholders’ financial lives and can therefore be framed as a positive economic indicator within the larger system of smallholder livelihood in Ukambani.

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