Kenya hails as a poster child of financial inclusivity in Africa. The country prides in its innovations in the finance sector: from efficient money transfer tools like M-Pesa to established mobile banking platforms. Over time, digitization has seen the country’s populace adopt and embrace financial inclusion, slowly edging out the use of traditional accounts SACCOs, MFIs, and conventional bank accounts.
According to a FinAccess report from a collaborative research between the Country’s Central Bank, The Kenya National Bureau of Statistics and Financial Sector Deepening Trust (FSD) Kenya among other non-governmental organizations, 83% of Kenyans have access to formal financial services. Formal financial services include banks, SACCOs, Monetary Financial Institution (MFIs), insurance, mobile money, asset finance, and digital credit apps. The country is East Africa’s most financially inclusive country with Uganda following closely at 78% and Tanzania tailing at 72%. Financial inclusion in Kenya is widespread across all its geographical regions, with North Rift Valley, the least financially all-rounded region recording 57% whereas Nairobi, the most inclusive province highlights a 96% inclusivity.
On the flip side, Kenya still maintains a vast population who embrace informal financial services such as groups, moneylenders, and shopkeeper credit. 62% of the population embraces a mixture of formal and informal financial solutions, owing to barriers of access like affordability limiting access to banking and insurance services. Worst still, 11% of the population is excluded from accessing formal and informal solutions except for cash savings at home or friends and family finance. 8% still suffers from extreme exclusion where the population uses no formal or informal solutions at all. The question still lingers; does financial inclusion guarantee financial health?
The survey which entailed questionnaires distributed among 8669 households between 1 September 2018 and 15 December 2018 shows an ironic comparison in the country’s financial well-being. While the country is more financially inclusive in 2016, citizens are less financially healthy today. Kenyans financial well-being in 2019 stands at 22%, a 17% drop from 39% recorded in 2016. This means that Kenyans are less likely to manage their day-to-day finances, cope with risk, and invest in the future than they were three years ago. People’s ability to cope with shocks also declined, with fewer people setting money aside for a rainy day or able to access a lump sum in case of an emergency.
Even with the variety of financial tools to choose from, the report shows that Kenyans rely heavily on assistance from family and friends to manage financial shocks such as poor health in individuals and relatives. This raises significant concerns on whether interventions in the current financial sector serve the peoples’ needs, especially when only 3 out of 28% of the people with access to the national insurance use the cover as the main solution to cope with health shocks. The rest seek financial solace in friends and family. At the same time, citizens preferred ad hoc solutions to shortfalls in finances such as casual labor for minimal returns, compromising their capacity to invest in long-term strategies for growth.
Even as the flood of digitization sweeps the country, leaving in its wake a variety of financial tools, a few facts remain. One, that the formal financial sector is strengthening rather than substituting the informal sector. Two, there is a need to promote appropriate regulation to ensure transparency and fair treatment. lastly, that the Kenyan financial sector should focus on driving real value to its customers, beyond simply providing Kenyans with accounts and aim to provide solutions to real-world problems.
