KIPPRA:Kenya’s mobile magic driving financial inclusion

A mobile phone in use . PHOTO COURTESY

Widespread financial inclusion is vital in unlocking the economic potential of a nation’s citizens. Kenya has taken a major lead in this direction through the intelligent use of technology as well as well thought out policies. Report by Benson Senelwa, Adan Shibia and Githinji Njenga (Policy Analysts, KIPPRA)

Financial inclusion is so critical to national economic development that it is set as a target in eight of the 17 Sustainable Development Goals (SDGs). It serves as the heartbeat for the collective pledge of ‘leaving no one behind’

“Merely having and using bank account changes women’s lives, by giving them decision-making power over the family’s finances,” says the Bill & Melinda Gates Foundation’s Goalkeeper’s Report, 2019.

This small but profound change in the decision making capacity in families has a huge impact on the next generation in developing countries and the ability of families and by extension, nations to break the cycle of poverty.

In tandem with possessing a formal account for individuals, access to affordable credit for the majority of SMEs can, and has unlocked economic energies and created both wealth and jobs. 

Over the past two decades, however, Kenya to its credit has taken financial inclusion very seriously and it is a pillar of the country’s long-term development blueprint, Vision 2030 that aims to transform Kenya into a middle-income country by the year 2030 with its concomitant raising of living standards.

The 2019 FinAcess Household Survey shows that in Kenya, the adult population with access to formal financial services has dramatically increased from 26.7% in 2006 to 82.9% in 2019. 

Other innovations include agency banking, digital finance and mobile apps. Mobile money, in particular, has acted as a revolutionary agent for formal financial inclusion.

Technological Reforms 

The Financial Access Survey (FAS) report 2018 shows that over the past decade, bank branches grew from 230 in 2004 to 2,833 in This rise reflects a major change in the banking sector culture to include the previously excluded low-end markets. 

The steady growth in the banking sector has also been complemented by agency banking. According to FSD Kenya 2018, over 80% of the Kenyan population is within three km of any financial source point. 

The ever improving mobile phone devices have also had a major part to play in the success of expanding financial inclusion. The formal sector has also received a substantial boost in its service through the mobile money platform. The FinAcess data shows that the urban poor and mostly the rural populations have become formalized.

While expansion in this financial infrastructure has been impressive for over a decade now, access is still facing problems the poorest 55% still face exclusion with usage still very low.

Fintech industry 

Kenya is among the top three African countries that are innovators in the financial sector –followed by South Africa and Nigeria. Services rendered on this platform range from digital lending and credit to mobile payments services. This has brought about intense competition in terms of costs as well as responsiveness to customer demands.

Obtaining personal loans online in Kenya is now faster and easier than getting a traditional bank loan, thanks to the introduction of mobile banking and rise in fintech companies. 

Conclusions and way forward

Kenya remarkably continues to make progress towards improved financial inclusion, mainly driven by mobile money banking. However, there is still much to be done to ensure these achievements remain sustainable and cost effective for poverty reduction and job creation. 

The largest gap in active registered financial accounts at about 27% was between those above and those below the poverty line. This gap could partly be attributed to lower levels of mobile phone ownership and financial capabilities. Moreover, there is a correlation between education and usage of mobile money services. 

Efforts, therefore, needs to be directed to the adaption of more inclusive innovations with fewer barriers despite one’s social status and level of literacy.