42pc of Kenyans Undeserved and Financially Excluded

A significant population of rural and economically-deprived Kenyans remains underserved and financially-excluded according to a 2016 FinAccess survey.

“The rural-urban gap in financial inclusion is rising. Over the past 10 years, the use of formal prudential services in urban areas has remained roughly double that of rural areas. Exclusion in rural areas is now roughly double that of urban areas and is falling much more slowly,” reads part of the findings.

Consequently, Kenya was ranked number one in inclusive financial services by the Brookings Institution’s 2017 Financial and Digital Inclusion Project with an overall score 86 percent compared to 2016 score of 84 percent for the third year in a row.

This was attributed to the country’s commitment to advancing financial inclusion, widespread adoption of mobile money services among traditionally underserved groups, an increasingly broad range of mobile money services and an enabling regulatory environment for digital financial services.

This was reiterated by the Financial Sector Deepening Kenya (FSD Kenya)  who state that “Kenyans excluded from any form of financial service dropped from over 40 percent of adults to 17 percent between 2006 and 2016.”

However “Poor Kenyans save more than they borrow, but only 9 percent of typical household savings go into formal accounts.”

Further “If Kenyans could effectively compare bank accounts they could, in some cases, save up to KSh 10,000 every year.”

This is according to their Price of Being Banked Report that found a lack of transparency in the varying costs of running a bank account in Kenya.

Interestingly, wealth is a better predictor of financial exclusion than location, gender, marital status or age. “Exclusion for the poorest continues to be high at 42 percent compared with the national average of 17.4 percent. By contrast, 95 percent of the wealthiest quintile are formally included.”

To achieve the Universal Financial Access 2020 initiative,  spearheaded by the World Bank Group envisions that adults worldwide will be able to have access to a transaction account or an electronic instrument to store money, send payments and receive deposits as a basic building block to manage their financial lives.

According to the World Bank, their approach gives focus on introducing transaction accounts, expanding access points, improving financial literacy, and driving scale and viability through high-volume government programs, such as social transfers, into those transaction accounts.

William Cook, Financial Sector Specialist, Inclusive Markets notes “Today’s exclusion might not be easily fixed by companies scaling their current financial products in response to customer demand. As best as we can tell, if you aren’t using mobile money in Kenya today, there is a good chance it is because you have little money to manage and believe the product does not dramatically improve your life.” 

“Achieving financial inclusion in the years ahead will require not only applying and building on existing products, but also continuing to innovate to better meet the needs of the excluded,” writes Cook.

Analysts within the country’s financial sector are of the view beyond costs, consumer behaviours are changing rapidly and bank branches are gradually giving way to convenient, self-service electronic channels that are not constrained by boundaries.

David Thuku, Family Bank, Chief Executive Officer said with the impact of digital transformation, the focus will be on the customer.

“The reality is that boundaries — between industries, between customer segments, etc — are fast disappearing, as the focus gets to understanding the customer and what they need. Whoever understands, regardless of the industry, will continue to remain relevant,” he said during a past CEO Chat ‘Digital Innovation and Banking ‘organised by the Kenyan bankers Association (KBA).