On the 5th of September 2019, the Financial Sector Deepening (FSD) Kenya and the Consultative Group to Assist the Poor (CGAP), held a stakeholder validation workshop in Nairobi, where they presented the findings of a research study that identified seven key financially underserved segments of the Kenyan population and discussed the potentially viable business cases and policy implications that financial market players could tap into.
The overarching objective of the workshop was to harness input from the participants and to stimulate consequential conversations on how the financial needs of these underserved Kenyans can be leveraged for greater economic inclusion and development. The data analysed and presented at the workshop was predominately drawn from the 2019 FinAccess Household Survey, launched in April 2019 by the Central Bank of Kenya, the Kenya National Bureau of Statistics and FSD Kenya. Data from FinAccess 2019 revealed that Kenya had made extraordinary strides in terms of financial inclusion. The most prominent finding from FinAccess was that financial inclusion has peaked at 83% among Kenyans as of 2019. While these findings are certainly impressive, they also evoke poignant questions. For instance, does the 83% financial inclusion rate translate into an improved quality of life for the average Kenyan?
It is in this context that FSD Kenya and CGAP collaborated on a research study to facilitate a deeper understanding of the FinAccess 2019 findings. CGAP, the Centre for Financial Regulation and Inclusion (Cenfri) and 71point4 explored FinAccess and other data to identify key population segments that display unmet financial needs and are strategically important for policy objectives and economic growth.
The study identified seven high potential market segments of the population whose financial needs are not being fully met by available services offered by the formal financial sector. Data on these segments was presented at the workshop to market players and policy actors with some suggested overarching implications for policy and business development. The seven segments are regional market farmers; local market farmers; sophisticated businesses; urban small and micro businesses; urban wage earners; public sector employees; and urban aspirational youth.
“Customers are at the centre of our work, and we see better understanding the financial underserved and segmenting this market as an essential step toward scale,” explained Jamie Anderson, a senior financial sector specialist at CGAP.
Seeta Shah from the Centre for Affordable Housing Finance in Africa (CAHF) was surprised to learn that one third of public sector employees and urban wage earners live in inadequate housing.
“I was astounded because in policy terms these people may be classified as middle or upper income and therefore considered well served,” Shah observed. “The data however shows that they are not well served. They live in housing that is semi-permanent, does not have proper toilets, green spaces, or with generally poor amenities.”
To illustrate the need for synergy between policy makers and market providers, Shah cited the interlink between housing and transport.
“Without transport you cannot unlock land that is far away,” she observed. “For instance if you live in the outskirts of Nairobi, like in Athi River, a good transport system could get you to the city centre within 20 minutes. The unfortunate reality is that people who have taken the step to buy houses in Athi River have to commute two hours each way to work because their jobs are still very centric in areas like Upper Hill, Westlands and downtown Nairobi. And many spend up to KSh 20,000 a month on their commute.”
FSD Kenya’s head of research, Amrik Heyer, remarked that the data and analysis seek to provide actionable information to actors that will shape the future of the financial sector, particularly policymakers and regulators, industry players, researchers, analysts and consumer groups.
“Studies like these can give us food for thought, and possibly plant the seeds for action,” Heyer said. “What has been really rich about today’s session is that it has brought a lot of know-how into the room, a deep level of experience from people who live and breathe within this market as well as an external perspective on our market. Without the experience and insights of market actors, data cannot be leveraged to inform business and policy. Similarly, without data, market actors lack the tools and ammunition to drive change. By bringing together the know-how with the evidence base, we lay the foundations for policy makers and financial services providers to create the kind of Kenya we want.”
Several months down the line, FSD Kenya and CGAP have put together detailed, actionable information on the seven potential market segments. This information would be useful in the development of real-world business solutions and enabling policy frameworks—drawing from the findings of the segmentation research study and the subsequent validation by financial market stakeholders.
Philip Emase is Communications Manager at FSD Kenya.
Special collection: Financially underserved Kenyans and their market potential
View: A brief infographic of the seven segments (PDF)
 About US$270