January 23rd, 2025

The 2024 FinAccess household survey, launched this week, provided a revealing glimpse into the financial lives of Kenyans post-pandemic.

The 2024 FinAccess household survey reveals a slight increase in financial inclusion, from 83.7% in 2021 to 84.8% in 2024, indicating a plateau in the previously steep growth of financial access.

Nearly half of the excluded population are rural youth lacking phones or identification documents (IDs), highlighting the rural-urban divide and persistent poverty. With 59% of the rural population among the poorest 40% of the country, compared to 9.7% in urban areas, the statistics call for a re-evaluation of market-based inclusivity approaches and a push for broader partnerships to address poverty.

On the brighter side, rural areas did better than urban in terms of green investment; 41.1% of rural residents invested in green initiatives compared to 26.2% of urbanites. This points to a huge opportunity for green rural development as a route out of chronic poverty.

Despite the increase in financial inclusion, financial health (the ability to manage day-to-day needs, cope with shocks/risks, and to invest in future goals) remains a critical concern.

In 2024, only 18.3% of adults were financially healthy, a slight increase from 17.1% in 2021 but still far below the 39% in 2016. This raises important questions about why financial inclusion is not translating into improved financial health. The ability to manage day-to-day needs and cope with shocks has seen some improvement, but the capacity to invest in the future has significantly declined. This is particularly evident among micro and small enterprises (MSEs), whose ability to invest in growth has plummeted by nearly 40 percentage points, from 63% in 2021 to 24% in 2024.

The survey data reveals a decline in savings rates for the first time since 2006, from 74% in 2021 to 68.1% in 2024. This is paralleled by an increase in debt stress, with 16.7% of borrowers completely defaulting on loans in 2024, up from 10.7% in 2021.

The percentage of mobile money users using the service daily has doubled to 52.6%, highlighting its growing importance in everyday transactions. These findings suggest that while the financial sector provides invaluable tools to support day-to-day survival, it is doing less well in supporting savings, investment, and growth.

The survey raises crucial questions: How can we support rural populations to effectively engage with the financial sector? What partnerships are necessary to overcome the barriers posed by deep poverty? How can we boost the agricultural sector, promote green development, and leverage mutual finance institutions like chamas and SACCOs? Could strategies such as tiered Know Your Customer (KYC) and outreach programmes for youth prevent further exclusion? Addressing these issues is vital to improving financial inclusion and health in rural areas.

Supporting Micro and Small Enterprises is critical, as they have been severely impacted by both Covid-19 and recent economic challenges. Addressing the declining savings rate and rising debt stress through credit reference bureaus and open data frameworks can unlock credit and reduce risks for both consumers and financiers. Dr. Kamau Thugge, Governor of the Central Bank, urged Kenya’s financial sector to “continue to innovate for efficiency and service delivery and introduction of new products and services that meet the needs of citizens.” This is particularly important for savings, where there has been less focus on innovation relative to credit. The recent reduction in the CBR rate by the Central Bank also opens opportunities for banks to provide more affordable credit for MSEs and borrowers.

In conclusion, the 2024 FinAccess household survey underscores the need for a comprehensive approach to improving financial inclusion and health in Kenya. The data shows that while Kenyans are increasingly accessing a diverse range of financial services, significant challenges remain. Addressing the disparities between rural and urban populations through support to agriculture and green development, supporting MSEs, and tackling issues of financial health and debt stress are critical steps toward ensuring that the benefits of financial growth are distributed equitably across the population.

The Cabinet Secretary, National Treasury and Economic Planning, John Mbadi, appealed to policymakers and innovators, urging them to ensure that FinAccess data remains ‘not just numbers’ but is translated into meaningful initiatives that have a ‘real impact on the people’. By addressing the root causes of exclusion and fostering an inclusive financial ecosystem, we can ensure a more equitable and prosperous future for all Kenyans.

This commentary was first published in the Business Daily on 9th December 2024. 

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