The Gatwikera Railway Savings Club and The Role of Rewards

In a previous post, I wrote about Rev. Duncan and his clever bank of 1810. Beyond providing an allowance for those out of work, his bank was creative in other ways, pressing into service rewards for specific behaviors.

“The rate of interest on savings deposits, fixed now by most banks at a conservative 3 percent, varied greatly on the moneys turned over to Dr. Duncan for safe keeping. A depositor of three years’ standing in his bank who wanted to marry would be paid 5 per cent while those remained single would be paid 4 percent.” 

While these behaviors may seem antique in 2012, they likely were socially important in 1810. What’s key is the concept of varying interest rates to inspire desirable habits. Similar rewards can be seen in the work of Lukas Alube, an activist who assists savings groups in the Nairobi slum of Kibera.

The Gatwikera Railway Savings Club, one of many clubs that Lukas assists, includes fifty women and men. It has divided its membership into more manageable savings groups of twenty-five members each.

Minimum savings is ten cents per day but some members are able to coax more from their meager incomes, depositing surpluses into their group fund.

The club has found ways to match member savings with grants and mortgages in a new housing project.  Beyond daily deposits into the group fund, members are each saving over the course of more than a year, an additional $400 to purchase a parcel of land located 30 kilometers from Nairobi.  Muungano Wa Wana Vijiji (Kenyan Homeless People’s Federation) will supplement that amount with another $600 apiece to complete the sum needed by each member for land acquisition.

To keep member spirits high, the club channels a portion of interest on loans toward specific member rewards. This past December, the member who saved the most received $18 (acknowledging progress) as did the member who saved the least (acknowledging both poverty and perseverance). Groups at that time had reached almost half their goal for land purchase.

Such bonuses sound much like a strategy deployed by Reverend Duncan: “Premiums for regular deposits were offered from the auxiliary fund, to which the extraordinary and honorary member of the bank contributed. Those “who should have exhibited proofs of superior industry or virtue” were rewarded with special honors.”

Doses of good medicine in 1810 seem much like doses of good medicine in 2012.