FSD Kenya’s new horizons for more inclusive finance

January 20th, 2020

Today, I am honoured to represent FSD Kenya at the UK Africa Investment Summit in London. I am inspired by the potential of the entrepreneurs, investors, government officials and civil society organisations who are full of ideas, solutions, and drive to leverage connections and learning across the continent to grow Africa’s economy and wellbeing. At FSD Kenya, we are humbled by the announcement today by the UK Secretary of State for International Development, Alok Sharma, of a new UK aid package for the FSD Network to strengthen Africa’s financial markets, boost economic growth and reduce poverty at scale.

Thanks to the leadership of our funders over the last 15 years including UK Aid, the Bill & Melinda Gates Foundation and the Swedish International Development Agency (Sida), FSD Kenya has been at the forefront of helping the Kenyan financial sector expand beyond the privileged few to reach the majority. While we celebrate this progress, there is still much to do to transform Kenya’s financial sector into one that truly makes a difference in poverty reduction and inclusive growth. As I have said before, we’re not there yet.
With this renewed support, FSD Kenya hopes to expand its work to help move Kenya to the next frontier of financial sector development to solve the intractable challenges faced by low-income households and enterprises in Kenya. This will include the development of financial solutions for agricultural value chains, affordable housing, and trade platforms as well as new work in climate finance and deeper engagement with both the potential and challenges for digital finance.

Here are a few thoughts about why these topics matter:

Agricultural value chains: Following Charles down the rows of his beautiful maize crop in Nakuru, we were impressed to learn of how a digital input loan helped him to double the yields on his crop. But increasing productivity is only part of the solution for improving the lives of agricultural households. More work is needed to help mitigate the increasingly unpredictable weather patterns, link to markets and fair prices, and increase the value addition of agricultural processing within Kenya. Our analysis of the gaps up and down agricultural value chains reveals that finance remains a significant barrier.

Affordable housing: Walking down the alleyways in Mukuru, we are struck by the bustle of economic activity and the general hum of life happening. Most families still rely on the inadequate makeshift housing common in this community. Increasing the stock of affordable housing is one of the ‘Big 4’ priorities and there are many potential projects in the works. Almost everyone we have spoken to bemoans the lack of financing at every level from building, maintaining and getting families into this housing. FSD Kenya hopes to deepen its relationship with the Centre for Affordable Housing Finance and join forces with others in Kenya to help the financial sector address affordable housing.

Trade platforms: Globally, retail trade is being transformed by the rise of digital commerce platforms and Kenya is no exception. Since our inception, FSD Kenya has worked with small traders, producers and growing enterprises to help them grow their businesses. As we began to explore the opportunities of e-commerce, we spoke with one entrepreneur who asked in a desperate voice, “Can you turn if off?” Her product had been so successful on one platform that the orders were coming in faster than she could produce and she needed a break to figure out how to expand her production capability. She had been unable to leverage her impressive sales growth to access working capital or expansion capital. Embedding finance into these platforms is a growing opportunity for the financial sector.

Climate finance: Although climate finance is largely a new topic for FSD Kenya, dealing with the realities of climate change is not. I’ve already mentioned the uncertainty for farmers that need new financial solutions to mitigate climate change. But perhaps the impacts of climate change are most stark in the arid and semi-arid lands (ASALs). On a trip to Marsabit County a few years ago, I was struck by how green everything seemed in this area which has been repeatedly burdened by drought. There was flash flooding that had taken out roads and prevented livestock traders from getting to market. But this was after a season where many of the livestock had died due to lack of water and grazing. This is just one of the many reasons FSD Kenya is keen to stimulate interest and action in both “greening finance” and “financing green.” The recent launch of the green bond in Kenya supported by FSD Africa is a step in the right direction. It was inspiring to attend the launch at the London Stock Exchange this morning.

Digital finance: FSD Kenya has been deeply involved in the development of digital financial services and fintech for many years as I highlighted in Why fintech matters. As technology continues to evolve and smartphone penetration increases, we need to ensure that digital finance evolves responsibly to protect consumers, increase competition, deepen access for marginalised communities and encourage real growth rather than just helping people get by. FSD Kenya’s most recent Cost of banking study highlights lingering challenges with digital finance and the recent Digital credit audit highlights many other challenges emerging in the context of rapidly growing digital credit markets. In collaboration with other FSDs from across the continent, we look forward to charting new paths in digital finance for Kenya and increase two-way learning opportunities with other markets.

Concluding thoughts

As I look forward to returning to Nairobi later this week, I am energised about transforming the Kenyan Financial Sector. I plan to re-read this insightful paper: Exploring the links between finance, technology and growth in Kenya. I also look forward to engaging with new and old partners as we seek to create greater value through more inclusive finance in Kenya.

Tamara Cook is Chief Executive Officer of FSD Kenya.

Read also

FSD Kenya welcomes £17.14m commitment from UK Aid to initiate new phase of financial sector development

Evolving agricultural credit: A combi-model for input and trade financing

Why Fintech matters: Reflecting on FSD Kenya’s work

Inclusive finance? Not there yet…

Exploring the links between finance, technology and growth in Kenya

Cost of Banking 2018

Housing finance in Kenya

The rise of African digital platforms

TCFD: 2019 status report



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