November 10th, 2023

From reach to value and positive outcomes.

Having made great progress in reach and usage, the strategic emphasis in financial inclusion in Kenya is shifting to the need for the financial sector to deliver value to consumers, meet their underlying financial needs and promote financial health. Financial consumer protection plays a core part in ensuring that financial services deliver value. Traditionally, financial consumer protection frameworks are anchored on stipulations for market conduct by regulated financial service providers. However, there is an increasing move, globally, to orient financial consumer protection on principles for treating customers fairly (TCF) that remain constant as market trends and risks evolve, and, importantly, that translate into positive consumer outcomes measured from the perspective of customers themselves.

FinAccess can play a key role in informing the evolving agenda towards outcomes-orientated consumer protection

The Kenya FinAccess survey provides granular insight into the consumer perspective on financial inclusion. As such, it can be used to derive insights on consumer outcomes that can inform the financial consumer protection agenda in Kenya, as well as the evolving financial inclusion measurement agenda.

An aggregate consumer outcomes index

This document develops a financial consumer outcomes index for Kenya, based on available indicators from the FinAccess survey. The financial consumer protection outcomes index – FCPOI in short – is calculated as the weighted average score across a range of sub-indicators in the FinAccess survey speaking to nine core elements. Six of these elements relate directly to the core positive consumer outcomes as defined by CGAP (2020)[1]:

• Suitability: The customer has access to good quality, affordable and needs-appropriate services
• Choice: The customer can make an informed choice among a range of products, services, and providers.
• Safety and Security: Money and information are kept safe, privacy respected, and control is given over my data.
• Fairness and Respect: Customers are treated with respect throughout interactions with financial service providers, even when the situation changes, and due regard is given to customer interests.
• Voice: Customers can communicate with the provider through a channel of their choice and get problems resolved quickly at minimal a cost.
• Meets purpose: Using financial services means that the customer is in a better position to increase control over their financial life, manage a shock, or attain other goals.

To this, the authors added three additional components of financial institution conduct and customer behaviour that drive customer outcomes and for which the FinAccess survey renders granular insights, namely:

• Disclosure – Consumers should have all information material to their financial decisions presented by financial institutions in a manner that can be easily accessed and understood[2].
• Financial education – Customers should be equipped with the set of skills and knowledge that allows them to make informed and effective decisions concerning their financial resources.
• Accessible dispute resolution and redress – Consumers should have access to channels whereby they can communicate any troubles or grievances that they are having with financial products and where disputes can be addressed[3].

The index aggregates the findings across these components, weighted according to the extent of take-up of different types of financial services among the adult population, to arrive at a single index value of the state of financial consumer protection outcomes in Kenya that can be tracked over time. It also shows the breakdown of the index components and compares aggregate and component outcomes of the index across key population segments, namely gender, age, income categories, livelihood types and urban versus rural location. The findings are contextualised and amplified through desktop research and key informant interviews on the financial consumer protection landscape in Kenya, as well as a set of qualitative consumer focus group discussions, to better understand the underlying perceptions and nuances, and to give consumers themselves a voice in articulating the financial consumer protection gains as well as remaining concerns.

Significant achievements, but specific vulnerabilities persist

The overall FCPOI score for Kenya is 67%. This suggests a 67% success rate of the regulated financial sector as a whole in generating positive consumer outcomes in aggregate. This high score acknowledges the dedication of the market to the fair treatment of customers and the existence of a broad-based consumer protection regulatory and institutional landscape. It does not, however, mean that all work is done. The high aggregate number masks relative differences across sub-components, with meeting purpose and voice showing up as particular pain points. The customer experience is also not uniform across types of providers, as the qualitative consumer research confirms, with banks, mobile money providers, insurers, SACCOs and MFIs each having unique strengths and areas for improvement. Furthermore, the comparison of the index components across population groups highlights important remaining vulnerabilities:

• Low-income households, rural dwellers, individuals over 55 years old and the non-formally employed scored poorly relative to their peers on some components of the FCPOI, highlighting the need for more efforts at identifying the specific consumer protection risks these groups face when interacting with financial products and services, and ensuring they receive stronger financial consumer protection going forward.
• Rural consumers, in particular, exhibited low levels of financial education, are less likely than urban consumers to feel that they have adequate access to information (disclosure) and that the financial services that they have meet their financial needs (meeting purpose). The available products and services are also less suitable to their needs than for urban dwellers.
• Low-income households, farmers, casual workers and dependents, women and rural dwellers are all largely unable to use financial services to cope with shocks, address liquidity shortfalls and contribute toward specific goals which require lots of money. More is needed for the financial sector to meet its purpose for all strata of society.
• A significant gender gap is observed in favour of men, driven largely by the voice, meets purpose, disclosure and financial education indicators. This suggests that women receive less effective financial consumer protection than men and should be prioritised in efforts to further strengthen financial consumer protection practices. Specifically, more attention is needed on finding channels and means for women to effectively communicate with financial service providers and have their queries resolved without feeling intimidated, receive disclosure, and become empowered financial service users.

Informing the financial consumer protection monitoring agenda

Further increasing the FCPOI score across all sub-components and for all sub-groups of the adult population will require a concerted effort among market players and regulators. The index seeks to add to the dialogue on consumer protection in Kenya by offering a stylised way of tracking consumer outcomes over time, which can be used to hold the market accountable and to feed into the further development of a conducive and coherent enabling environment. The first generation of the index as included in this report is intended as a proof of concept, for further refinement in future survey years and as more evidence emerges on the key proxy indicators for customer-centric financial consumer protection in the Kenyan context.

Click here to read the full publication

Click here to read a slide deck presenting highlights from the publication.  

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[1]        These six outcomes relate closely to treating customers fairly (TCF) principles framework.

[2]        While there is some element of disclosure in choice as well as suitability, it was separated out for the purpose of the index due to the direct role that disclosure plays in financial consumer protection.

[3]        This is separated out from “voice” for the purpose of the index, as voice is positioned in the index to pick up on the ability for ongoing communication with the financial service provider.

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