Financial Inclusion is growing and fast
- Financial inclusion is growing, and fast. Kenyans excluded from any form of financial service dropped from over 40% of adults to 17% between 2006 and 2016.
Access to any form of formal financial service has dramatically increased from about 27% to over 75%.
- And that growth is continuing: The number of Kenyans not using any form of financial service declined from 25.1% in 2013 to only 17.4% in 2016.
Inclusion was driven by largely by mobile money services, used by over 71% of adults, as well as mobile banking services such as M-Shwari, Equitel and KCB-M-Pesa. Just a few years after their introduction, mobile banking services are already used by 17.5% of Kenyans and have become the most common banking solution among youth aged 18 to 25.
- Almost a third of Kenyans already have a mobile money account in their name by the time they are 18 years old.
Well Told Story, with FSD Kenya and the Bill and Melinda Gates Foundation launched a report on an area of finance we still don’t know much about: young people’s financial pre-journey, the period before they become adults. One of the findings was that Kenyan entrepreneurial spirit starts young: teenagers have usually started making their own money such as pocketing their parent’s grocery store change or selling second hand clothing.
- If Kenyans could effectively compare bank accounts they could, in some cases, save up to KSh 10,000 every year.
FSD’s Price of Being Banked Report found a lack of transparency in the varying costs of running a bank account in Kenya. FSD’s researchers had to make up to six visits per bank in addition to consulting tariff guides at branches and online to determine the cost of a transaction, showing how hard it is for the average customer to make comparisons.
- Over 71% of adults use mobile money in Kenya
Usage of mobile money payments grew by 36% in 2016 to a record level of 1.5 billion transactions, compared to 1.1 billion transactions in 2015. This amounted to a value of almost KSh 3.4 trillion. The gross number of customers recorded – which includes multiple usage and dormancy – has continued to grow, reaching 35 million in December 2016 compared to 29 million in December 2015.
- Sending money to Africa is more expensive than anywhere else in the world.
The average cost of sending money to Africa is almost 10%, compared to the global average of just over 7%. Sending to Kenya from the UK is only 7% but still, the UN Sustainable Development Goals say that by 2030 the global average price for remittances should not exceed 3% of face value, with even the most expensive countries not being more than 5%.
- M-PESA is estimated to have lifted 194,000 households, or 2% of Kenyan households, out of poverty.
The impact is more significant in female-headed households and seems to be driven by changes in financial behavior such as increased financial resilience and saving as well as occupational choice. This is especially true for women who moved out of agriculture and into business.
- While Africa may not be “rising,” its economies are dramatically changing: 23% of sub-Saharan Africans now live on $2-$5 per person per day.
Even through a period of high growth, large numbers of people did not reach middle class and the stable jobs, disposable income, homes and cars that come along with it. Still, absolute poverty and a new class of consumer emerges, what FSD Africa calls “cusper” households that get by on $2-$5 per day while straddling the formal and informal worlds.
- School fees are expensive for the ordinary Kenyan family, especially at secondary level. Even a low-cost rural school may charge KSh 20,000/year per student, in areas where typical families earn KSh 6000-7000 per month.
From research, including the Financial Diaries, we know that families in Kenya struggle to pay school fees. Still, they are willing to sacrifice for schooling due to the high payoff that education can bring over the longer term, for the child and for the family as a whole.
- Poor Kenyans save more than they borrow, but only 9% of typical household savings go into formal accounts.
FSD’s Financial Diaries, a 2012-13 study on how poor Kenyans manage their money, found that the median household held the equivalent of 129% of their monthly income in financial assets, versus only 53% in liabilities. This financial asset accumulation is higher than we have observed among low income people in other countries. However, the majority of this money is mediated informally.