Financial Inclusion is growing and fast
Access to any form of formal financial service has dramatically increased from about 27% to over 75%.
Inclusion was driven by largely by mobile money services, used by over 71% of adults, as well as mobile banking services such as M-Shwari, Equitel and KCB-M-Pesa. Just a few years after their introduction, mobile banking services are already used by 17.5% of Kenyans and have become the most common banking solution among youth aged 18 to 25.
Well Told Story, with FSD Kenya and the Bill and Melinda Gates Foundation launched a report on an area of finance we still don’t know much about: young people’s financial pre-journey, the period before they become adults. One of the findings was that Kenyan entrepreneurial spirit starts young: teenagers have usually started making their own money such as pocketing their parent’s grocery store change or selling second hand clothing.
FSD’s Price of Being Banked Report found a lack of transparency in the varying costs of running a bank account in Kenya. FSD’s researchers had to make up to six visits per bank in addition to consulting tariff guides at branches and online to determine the cost of a transaction, showing how hard it is for the average customer to make comparisons.
Usage of mobile money payments grew by 36% in 2016 to a record level of 1.5 billion transactions, compared to 1.1 billion transactions in 2015. This amounted to a value of almost KSh 3.4 trillion. The gross number of customers recorded – which includes multiple usage and dormancy – has continued to grow, reaching 35 million in December 2016 compared to 29 million in December 2015.
The average cost of sending money to Africa is almost 10%, compared to the global average of just over 7%. Sending to Kenya from the UK is only 7% but still, the UN Sustainable Development Goals say that by 2030 the global average price for remittances should not exceed 3% of face value, with even the most expensive countries not being more than 5%.
The impact is more significant in female-headed households and seems to be driven by changes in financial behavior such as increased financial resilience and saving as well as occupational choice. This is especially true for women who moved out of agriculture and into business.
Even through a period of high growth, large numbers of people did not reach middle class and the stable jobs, disposable income, homes and cars that come along with it. Still, absolute poverty and a new class of consumer emerges, what FSD Africa calls “cusper” households that get by on $2-$5 per day while straddling the formal and informal worlds.
From research, including the Financial Diaries, we know that families in Kenya struggle to pay school fees. Still, they are willing to sacrifice for schooling due to the high payoff that education can bring over the longer term, for the child and for the family as a whole.
FSD’s Financial Diaries, a 2012-13 study on how poor Kenyans manage their money, found that the median household held the equivalent of 129% of their monthly income in financial assets, versus only 53% in liabilities. This financial asset accumulation is higher than we have observed among low income people in other countries. However, the majority of this money is mediated informally.