60% of Kenyans Use Informal Solutions to Deal with Financial Shocks

A new report dubbed “The 2019 FinAccess Household Survey” has revealed that a record 60 percent of Kenyans mostly use informal solutions such as assistance from friends and family to deal with financial shocks and income shortfalls.

According to the survey, Kenya has made significant milestones in expanding the access to financial services and products to 82.9 percent in 2019 from 26.7 percent and 75.3 percent in 2006 and 2016 respectively.

The figures draw a different picture despite financial inclusion in Kenya having improved. This is because it is clear that a huge population of Kenyans still prefer to use informal solutions to deal with income shortfalls and shocks.

Nairobi was found to have the highest rate of financial inclusion, having recorded a 96 percent rate of inclusion, followed by Mombasa and Central Region with inclusion rates of 94 percent and 85 percent respectively.

Regions with the lowest inclusion rates include the North Rift Valley with a 57 percent rate and Upper Eastern region with a 64 percent inclusion rate.

Substantial Rise in Use of Mobile Money, Mobile Banking, and Digital Apps

The survey further revealed that digital apps offering financial services have a record of 2 million users.

This is probably due to the fact that in 2018, Kenya’s mobile phone penetration surpassed the 100 percent mark as reported by the Communications Authority of Kenya (CA).

On the other hand, 6 percent more Kenyans are using insurance than in 2016 (1.5M people).

The use of SACCOs, MFIs and traditional banking (excluding mobile banking), substantially went down on the account of mobile money taking the largest share of users.

Saving and Borrowing

The survey found that 70 percent of the population in Kenya are savers. The mediums of saving used by the majority of Kenyans were mostly informal, with the use of chamas being the most popular savings device, followed by a mobile wallet.

Read Also: Kenyans Borrowing Recklessly to Maintain Lavish Lifestyles

Borrowing is also fast rising among the adult population in Kenya. Shopkeeper goods on credit were the highest form of borrowing found by the survey, with a 30 percent share of the total borrowing devices. In fact, shopkeeper goods on credit have risen from 10 percent in 2016 to 30 percent in 2019.

On the other hand, the uptake of mobile banking has gone up from 6 percent in 2016 and now stands at 10 percent in 2019.

How Do Kenyans Use these Savings and Loans?

The survey revealed that debt is used overwhelmingly for consumption, meaning that a majority of Kenyans took up loans and advances to satisfy basic needs such as food, clothing, and shelter.

Savings, on the other hand, were used for a range of purposes such as investments.