Posted on May 15, 2019

How poor households invest in their children’s future

Education is the top priority for Kenyans according to FinAccess Household Survey 2019. Poor households particularly attach high value to educating their children. Education is only second to putting food on the table for such households. They see investing in the future of their children as the means to changing the trajectory of their lives. According to the Kenya Financial Diaries, about a quarter of poor households’ meagre income is spent on education. Keeping children in school poses an even greater challenge for single parent-households whose incomes are significantly lower. This is the first of two blogs looking at education finance.

To understand how parents finance the education of their children, in 2018 Dignitas and the Future of Learning Fund carried out a survey among households in some informal urban settlements and peri-urban parts of Kenya. Those interviewed were categorised as farmers, informally employed, self-employed, and formally employed. Based on this survey, many children are sent home from school each term because of school fees balances. Most of those sent home belong to single parent households (61% compared to only 16% from two-parent homes). When this happens, some parents borrow to get their children back while others negotiate payment plans with the schools. Over 90% of these children return to school within the week.

While insufficient income is a key contributor to the ability to pay school fees, reliability of income is equally important.  In any given term, all the children from households dependent on farming are sent home compared to only 42% of those whose parents are employed or in business. About 60% of fees is paid in instalments, with a lump sum at the start of the term and the rest in bits, usually, when the children are sent home from school. The sending home of children serves as a reminder to the parents and mounts pressure on them to pay outstanding fees.

A third of school fee instalments are made on monthly basis and a quarter whenever the parents have money. Only 2% of fees is paid through “gifts” by well-wishers or guardians. Instalment payment of fees is part and parcel of how fees is paid, with 56% of those using this option considering it as “paying fees on time”.  This is not surprising given that most schools have instalment fee payment plans and children are only sent home if these are not honoured. While not all the fees is paid when a child is sent home, the balance is usually cleared by the end of the term.

So where does the cash for paying school fees come from? Why do parents wait until when their children are sent home from school before paying fees? School fees comes from varied sources. Most parents (61%) save for their children’s school fees. The majority of those who save are formally employed – 74% in this category save. The farmers on the other hand do not save at all.  Chamas, that is informal groups, play an important role in saving, taking 29% of the savings. Others are bank accounts and mobile wallets at 22% and 20% respectively. Top considerations in choosing where to save are safety of the savings, ease of saving, and the ability to access the cash in an emergency.

The savings made for education are hardly enough and so are augmented by loans (43%). Usually, the education loans cover much more than just school fees. The other expenses include text books, school uniform, and food. While parents from all categories borrow from chamas, SACCOs and banks are the confines of the those in formal employment (20%) and semi-formal employment (8%). How does the inability to pay fees on time affect the quality of education? How can finance ease the burden of these parents? The next blog will look at the available financial services for education and explore what a suitable solution would look like?

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