A year of COVID-19 – what role did inclusive finance play?

March 12th, 2021

It is hard to believe it has been a year since the first COVID-19 case was confirmed in Kenya – what a year! As I noted in the “How can inclusive finance help in a pandemic?” blog posted the Monday after the first case, our team was together when we heard the news (during what was supposed to be an “off-site” retreat but had been moved into our office due to concerns about the virus). We have continued to work largely remotely since that day.

Although many terms get bandied about, for us Inclusive Finance means a financial system that delivers useful, affordable, and trustworthy financial solutions to low-income households and micro, small and medium enterprises in ways that help them manage day to day, deal with risk and invest in the future. We believe that inclusive finance plays an important role in both poverty reduction and generating inclusive growth.

As we discussed how inclusive finance might play a role in helping Kenyans deal with the virus in March 2020, there was a lot we got right and a lot that we frankly missed. It is no surprise that our worries about negative impacts on micro, small and medium enterprises, casual labourers, education and tourism livelihoods have happened. Although we knew that this would be difficult for women, we did not anticipate just how gendered the impact would be.

We have worked closely with partners and stakeholder over this last year to navigate the challenges of COVID-19 and generate research and data that could be shared with decision-makers to help them understand the implications. As we reflect on the last year, it is useful to revisit much of this work and take stock of the role of inclusive finance in addressing the implications of COVID-19.

One of the first things we did was initiate the research with the Kenya Financial Diaries households in partnership with BFA Global resulting in the Kenya COVID-19 Diaries series of blogs and other outputs. Since the trust was already built between the researchers and these households, it was possible to do phone interviews which yielded deep qualitative insights. We did 4 rounds of interviews beginning at the end of March 2020 and ending at the beginning of January 2021. Each round brought stories of heartbreak like Jennifer who is running out of options as she approaches her delivery as well as stories of resilience like these early stories of shifts in household division of labour. Households shared stories of using their savings to store up food and supplies to help them deal with the risk but also how the economic slowdown and loss of local remittances was hurting their ability to manage day to day. Although some were able to access credit, many informal options like shopkeeper credit dried up.

Reflecting on the research, the team noted four “seasons” of COVID from Full alert in March to Crisis in June, to Modest recovery in September to a New normal in December. Perhaps the best way to check in on this research is to watch the webinar from June 2020 or the latest webinar from the research team.

To complement this more qualitative look at the pandemic, we also worked with analysing market data to highlight impacts on the financial sector and economy in the COVID-19 Econ Data portal. Here are a few examples of the trends we have observed which you can explore in greater detail on the site:

  • CICOs: The value of cash in and cash out (CICO) transactions at mobile money agents increased by an unprecedented 58% from December 2019 to December 2020, a growth rate of more than 10x the previous year.
  • Global remittances: Although other countries have seen a decrease in receipts of international remittances, Kenya saw an increase. Over $3.1 billion was received in 2020, an increase of over 10% on the year before, between April and September 2020 approximately 75% of these funds passed through M-Pesa Global and into digital wallets.
  • Bank deposits: As of December 2020, bank deposits had grown to KShs 4 trillion –an increase of over 13% from the same month the previous year, the highest rate of increase in the past 5 years.
  • Non-performing loans: Bank’s non-performing loans reached 424 billion KShs in December 2020 – a 27% increase on the same month in 2019. This represents 14% of the value of gross bank loans.


Another early initiative was to undertake a scenario process, not to predict, but to develop plausible scenarios of economic consequences of COVID-19 per the chart below. This was a helpful frame for considering the differentiated impacts of the pandemic including on gender and the potentially growing digital divide.

This initial analysis grew into targeted analysis for many stakeholders including this most recent output on the State of the Economy: Focus on the Impact of COVID on women and education. The focus on women was the basis of Professor Bitange Ndemo’s piece: Kenya’s economy resilient but more unequal due to COVID. The focus on education came in part from a study conducted with low-cost schools captured in this blog and webinar.

In trying to understand how Kenya is faring in comparison to others on the continent, we worked with an FSD Network member, FinMark Trust, who received support from the Bill & Melinda Gates Foundation to conduct a COVID-19 tracker survey across Kenya, Nigeria, Rwanda, South Africa and Uganda. For example, we saw that Kenyans were far less likely to receive government support in food or money (1%) as compared to the other countries (3- 13%) and Kenya also had the highest percentage of missed loan payments at 15%. The chart below shows how the ability to generate emergency funds in Kenya changes over the five waves of the survey.

Beyond the research, data and policy engagement, FSD Kenya worked closely with many of its partners to help them navigate the pandemic. One experience that stands out to me was my August visit with the Gede Financial Service Association (FSA)  who has struggled to restructure their one branch, their engagement with customers and the digitisation of their savings and loan collections. Their members had been very hard hit by the drop in tourism at the Coast and were only beginning to recover their businesses. Our Building Livelihoods project in Marsabit also found ways to pivot the programme to serve the participants but also found that the project had already helped prepare the families to be more resilient in the face of the pandemic. Building on FSD Kenya’s long support for social safety nets in Kenya, we worked with public and private sector players to encourage cash transfer programmes to support households during the pandemic including a small pilot to deliver cash grants to parents of needy children. Consistent with the public data available on the increase of digital payments, FSD collaborated with a local merchant acquirer, Kopo Kopo, to explore How COVID-19 has affected digital payments to merchants in Kenya. We have also been working with the National Treasury and the Central Bank of Kenya on launch of the MSME Stabilisation Fund which was operationalised earlier this year.

As we look back on this difficult year, we can be thankful that the infection rate has remained lower than feared at the beginning (although the Diaries research points to how this is likely under-reported and the numbers this week point to what is being called a “third wave” in Kenya.) As the situation continues to evolve, we face the current reality and future with sobriety. Many of these measures to address COVID-19 have been slow to implement because the basic institutional frameworks were not in place to implement tools like cash transfers and guarantee funds. As we focus on building back better, it is also important to build in ways that prepare for the next crisis and to apply approaches that ensures inclusiveness and resilience to adapt to future shocks when they do occur. There is also growing concern about how this pandemic could further exacerbate the divergence between the have and the have-nots, leaving many struggling to survive, much less thrive. We must find ways to ensure that the most vulnerable – children, the elderly, people with disabilities, and women – do not fall through the cracks. Although the first vaccines have now arrived in Kenya, we are a long way off from national coverage.

At FSD Kenya, we are committed to running this marathon alongside others building on lessons from the last year helping to find ways for inclusive finance to be part of the solution to help see Kenya through.



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