Kenya prides itself as a leader in financial inclusion. For more than 10 years, the country has been ahead of 20 other countries in terms of financial inclusion.
Kenya’s financial inclusion story has always revolved around the use of mobile money platforms such as MPESA, Airtel Money and T-Kash by Telkom Kenya but rarely one will hear commercial banks being mentioned.
While mobile money transfer and lending have facilitated more peer-to-peer, business-to-business, customer-to-business and citizen-to-Government transactions, financial inclusion and universal access to formal financial services remain the industry’s rallying call as cash is still king.
Many living in rural areas, including youth, women, and people with disabilities continue to be under-represented in the prudentially regulated financial services ecosystem due to their preference for informal and social systems.
According to the 2019 FinAccess Household Survey, the number of men with access to financial services in Kenya in 2019 stood at 86 percent against 80 percent for women.
The 2019 FinAccess Household Survey indicates that access to formal financial services increased from 75.3 percent in 2016 to 82.9 percent in 2019.
The percentage of the population excluded financially went down from 17.4 percent to 11 percent over the same period. The positive trend has largely been attributed to mobile banking offered by banks in partnership with mobile network operators (MNOs), application programming interfaces (APIs) and the integration of the two through platforms such as PesaLink launched in 2017 by KBA’s subsidiary Integrated Payments Services Ltd. (IPSL).
How have Kenyan commercial banks facilitated financial inclusion?
Although there is a notion that commercial banks stopped lending to Small Medium Enterprises (SMEs), the truth is, the banks are still doing a lot to help SMEs, or else, millions of them would have folded businesses already.
The role that Micro, Small and Medium-sized Enterprises (MSMEs) play in the economy is now fully appreciated.
There are approximately 7 million MSMEs of which more than 80 percent are informal and unlicensed. These businesses contribute to the employment of more than 13 million Kenyans and makeup 28 percent of the national GDP.
A 2014 KBA survey on the credit needs of MSMEs found that while these businesses form the driving force of the economy, many find it difficult to not only access finance but also get through the operational hurdles that see them collapsing.
The study further revealed widespread demand among MSMEs for financial literacy, management skills, strategic planning to scale operations, and compliance with legal and regulatory requirements.
To fill the capacity gap, KBA in October 2018 launched the Inuka Enterprise Program. Together with the Kenya Institute of Management (KIM), Kenya National Chamber of Commerce and Industry (KNCCI), and the Kenya Association of Manufacturers (KAM), Inuka facilitates access to finance through training, networking and coaching opportunities.
To fortify these efforts, KBA has established an online platform (inukasme.co.ke) where entrepreneurs access valuable information on how to overcome challenges that may cripple their startups and small businesses.
Visitors to the platform get free access to important knowledge, including practical case studies ranging from how to increase crop yields, and rebuilding one’s business after a failed attempt, to marketing through cost-effective channels such as social media. Complementing the online program are face-to-face training sessions sponsored by KBA member banks.
The SMEs are the key to financial inclusion
Financial inclusion is not just about having money but also keeping the money in circulation. The right people to make this happen are SMEs, most of which are in touch with the people on the ground on a daily basis.