November 30th, 2007

This report is the first of what intend to become an annual, concise but comprehensive overview of FSD Kenya’s work. Our objectives are two-fold. First, we want to help build a better understanding of the development of financial markets in Kenya and FSD Kenya’s role in expanding access. Second, FSD Kenya and its funders are committed to being fully accountable to stakeholders. In order to meet that commitment we need to present the result of our work in a clear and accessible way. We would very much welcome feedback on how we can improve this report to better achieve these two objectives.

All FSD Kenya’s work is founded on supporting the development of sustainable financial markets. The first section of this report provides a brief overview of this approach, which is often referred to as making financial markets work for the poor. The last four years has seen remarkable changes in the financial sector in Kenya. In the second section we offer our perspective on recent developments in Kenya’s financial markets and the impact on financial inclusion. Following these two introductory sections, the report on our activities is organized according to our five focal theme areas: (i) building core capacity, (ii) pushing the access frontier, (iii) agricultural finance, (iv) expanding finance for growth and (v) deepening the payment system.

Since FSD’s inception building the capability of the core formal financial system to support greater financial inclusion has been a priority. It provides the foundation on which much other work will build in future. Again in 2007 this first theme area saw the greatest level of activity. However we anticipate that over time this will gradually be supplanted by our more targeted work. This is covered in the next three theme areas whose aims are, respectively, to reach more remote rural areas, expand finance for smallholders and address the growth businesses in the small and medium enterprise
(SME) segment. Levels of activity have increased markedly in each of these areas over 2007. Our final theme area has been focused on the development of the payment solution system. FSD’s involvement arose from the needs of the government and donors from a payment solution to permit the implementation of new social protection programmes. However, the importance of the payments infrastructure in expanding access goes far beyond these programmes.

All our work is based on partnerships. Over 2007 we worked with a range of partners from the private sector, civil society, government and development agencies. The table below lists just those with whom we directly worked. It omits many with whom we interacted indirectly in various ways. The length of even this abbreviated list serves to emphasize the vital importance of collaboration to FSD’s work. While we work with partners in a wide variety of ways the common theme is a shared commitment to the goal of financial inclusion in Kenya. We would like to take this opportunity to thank all our partners for their support and efforts over the year and look forward to deepening this work in the future.

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