April 9th, 2026

When FSD Kenya was established in 2005 as a specialised market systems facilitator, only about three in ten Kenyan adults (27%) had access to formal financial services. Twenty years later, that figure stands at eight in ten (84.7%). This note captures the deliberate, behind-the-scenes market systems role that FSD Kenya played in shaping that transformation.

A market systems approach does not build financial services directly. Instead, it works on the conditions that allow markets to function better for poor and excluded people – the quality of information in the system, the policy and regulatory environment, the infrastructure that providers depend on, and the innovation ecosystem that generates new products and business models. Since 2005, FSD Kenya has pursued all of these levers consistently, supported by a core group of bilateral donor agencies and private philanthropies at an average of $6.5 million per year.

In practice, this has meant working across four interconnected areas:

Beyond access – the unfinished agenda

Expanding access to formal financial services was always a means to an end, not the end itself. As headline inclusion has approached near-universal levels, FSD Kenya has been honest about what the numbers don’t show. Less than one in five Kenyan adults meets the definition of being financially healthy — meaning they can manage day-to-day expenses, absorb financial shocks, and pursue economic opportunities. This proportion has not kept pace with rising use of formal financial services, and Kenya is not alone: South Africa, with similarly high formal inclusion rates, faces the same paradox.

The financial system remains quite shallow when measured against key macro indicators – private credit stands at 31% to GDP[5]  – well below South Africa’s 90%. Household savings are at 11% compared to India’s 30% of GDP. And despite two decades of financial sector growth , 83% of Kenyan employment remains informal – ^[6]. Far more people have accounts. The underlying economic structure that should have helped people achieve upward economic mobility has shifted far less.

These are uncomfortable findings, but naming them is part of the market systems development approach – good facilitation requires a clear-eyed view of what is working and what isn’t.

Finance and poverty – what the evidence shows

FSD Kenya’s theory of change has always linked rising financial inclusion to poverty reduction — by opening new economic opportunities for poorer households and cushioning them against shocks that could drag them deeper into poverty. Twenty years of evidence offers qualified support for this logic.

Kenya’s official poverty headcount fell from 47% in 2005/6 to 33% by 2019[7], a significant reduction that coincided with the expansion of digital financial services. Rigorous research has found causal links: a landmark 2016 randomised control trial by Suri and Jack demonstrated that mobile money transfers reduced poverty by providing rapid access to liquidity[8]. An independent evaluation of the Hunger Safety Net Programme — whose payouts FSD Kenya designed and managed — found a measurable reduction in the poverty gap and improved resilience among recipients[9]. When Covid-19 hit, the digital payments infrastructure that FSD Kenya helped build allowed emergency cash transfers to reach vulnerable households faster and at lower cost than would otherwise have been possible.

Yet the poverty headcount rose again to 39% by 2022, largely reversing the pre-pandemic gains. The Kenya story cautions against any assumption that financial inclusion alone is sufficient to drive lasting poverty reduction. It is a necessary condition, not a sufficient one. A range of factors including employment, productivity, policy stability among others, shape whether financial access translates into economic wellbeing.

Adapting the market systems approach – the 2016 pivot

By 2016, FSD Kenya could foresee that formal financial inclusion would approach universal levels. The question was no longer how to get more people into the system, but how to make the system work better for those already in it — particularly in the real sectors of the economy where poor Kenyans actually live and work. This led to a strategic pivot: from financial access as the primary goal, to finance as a tool for inclusive growth in health, housing, and agriculture.

The choice of these three sectors was deliberate. Agriculture contributes over a fifth of Kenyan GDP and employs up to 40% of the population. Health and housing each contribute around 5% of GDP, and both have seen significant shifts in government policy in recent years.

The 2025 independent review of FSD Kenya found promising results at the intervention level in all three sectors. However, it also concluded that systemic change has not yet been achieved. The three sectors comprise of large, complex systems with multiple failure points with policy volatility, weak infrastructure, and entrenched informality among them. The market systems lesson FSD Kenya has drawn is not that the pivot was wrong, but that pro-poor change in sectors of this complexity requires a longer time horizon, tighter strategic focus, and the agility to adjust as the policy environment shifts.

2026 – 2030

FSD Kenya enters its third decade at an inflection point  for Kenya, for the financial sector, and for the market systems approach itself.

Just as mobile technology created the platform that powered financial inclusion over the past twenty years, new technologies — artificial intelligence, machine learning and tokenisation among them — are emerging as potential drivers of the next wave of change. While the opportunities are real, so are the risks. AI and related technologies could dramatically lower the cost of credit assessment, insurance pricing, and financial advice for low-income customers. They could also entrench existing exclusions if left to develop without deliberate stewardship. The technologies are getting more complex, the market failures less obvious, and the risk of well-intentioned interventions causing harm has grown alongside the scale of the systems involved.

This is precisely the space a market systems facilitator is designed to occupy. FSD Kenya’s value has never been in delivering financial services directly — it has been in shaping the conditions under which markets deliver better outcomes for the poor. That role is, if anything, more necessary now than it was in 2005. The technologies are more complex, the market failures less obvious, and the risk of well-intentioned interventions causing harm has grown alongside the scale of the systems involved.

Kenya’s financial system does not need FSD Kenya to function. It will continue to grow and, for the most profitable segments, to thrive. But with FSD Kenya’s independent scrutiny and facilitative support, it is more likely to grow inclusively, and Kenya’s experience of making digital finance work for the poor is one that other countries are watching and learning from. That demonstration effect is itself a form of systemic change.

Read the full FSD Kenya – Twenty years of a market systems approach in the Kenyan financial system report here. 

[1] Gates Notes Annual Letter 2015 available here

[2] Drought, digital innovation, and money: How the hunger safety net cash transfer programme has transformed access to financial services in the arid lands of Kenya.

[3] In 2024, PesaLink recorded 8.41 million transactions worth KShs 1.1 trillion, with an average transaction size of KShs.  134.1K. PesaLink had 70 connected partners in 2024 consisting of banks, SACCOs, telcos, MFIs, and fintechs – https://pesalink.co.ke/resource-center/pesalink-by-the-numbers

^[4] The Growth of M-Shwari in Kenya–A Market Development Story : Going digital and getting to

scale with banking services, November 2016

[5] World Bank, 2023

^[6] ILO reported that 83% of Kenyan employment was informal, almost unchanged from 82% in 2015.^#

[7] ^[7] KNBS Kenya Integrated Household Budget Survey; Kenya Poverty report 2022 available here

[8] Suri, T. & Jack, W. (2016). The long-run poverty and gender impacts of mobile money. Science, Vol. 354, Issue 6317, pp. 1288–1292.

[9] OPM (2018) Evaluation of the Kenya Hunger Safety Net Phase 2 available here

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