A recent FinAccess Research dated July 2019 by FSD Kenya shows that 83% of the Kenyan population is now formally financially included as of 2019.
The report however reveals that cost remains the major barrier to further financial inclusion and adoption of financial services.
Formal inclusion in 2019 by region in Kenya stands as follows:
- Nairobi – 96%
- Mombasa – 94%
- Central Rift Valley – 88%
- Central – 85%
- North Eastern – 84% (a jump of 60% from 25% since 2016 mainly through mobile money)
- Western – 83%
- Lower Eastern – 80%
- Nyanza – 78%
- Coastal – 78%
- South Rift – 78%
- Mid-Eastern – 77%
- Upper Eastern – 64%
- North Rift Valley – 57%
Percentage of adults using financial services as of 2019:
- 79% – mobile money accounts
- 25% – Mobile bank accounts
- 30% – National Hospital Insurance Fund
- 8% – Digital app loans
On average, 83% of Kenyans have a formal account and exclusion is down to only 8%.
Interestingly, despite banks having tripled their user base to 41% of the population in just 13 years since Equity Bank’s savings-led approach to simplified accounts emerged, usage of banks by the wealthy has declined by 4%.
Saccos and MFIs provide just over 1 in 10 Kenyans with financial services. On the other hand, 1/3 of the formally included population rely solely on a mobile wallet.
Formal inclusion has added to the richness of people’s portfolios with over 50% choosing to use a combination of both formal and informal solutions.
The cost of financial inclusion remains the major barrier to uptake as shown below:
- Banks – 75% cited affordability as the major barrier
- Mobile Money – 57% cited affordability as the major barrier
- Mobile Banking – 73% cited preference cited as the major barrier
- Insurance – 60% cited affordability as the major barrier
- SACCOS – 51% cited preference as as the major barrier
The above is attributed to a huge population (40%) who earn on average KES 12, 700 (Approx. $130) a month making inclusion beyond their reach.
Despite an increased uptake of mobile money, cash is still king as the most frequent payment mode in many areas of usage as shown below:
- Monthly bills – 67% pay in cash
- School Fees – 66% pay in cash
- Daily expenses – 98% in cash
- Sending / giving money in Kenya – 51% in cash
- Receiving money in Kenya – 52% in cash
A similar trend is evident when it comes to payment of incomes as shown above. Digital payment of incomes however is on the rise, especially among farmers and businesses.
Savings among Kenyans have seen formal and formal digital savings rise while the use of chamas and formal non-digital means like banks have declined as shown below:
On the other hand, borrowing across all channels has been on the rise, with shopkeeper credit seeing the biggest change up from 10% in 2016 to nearly 30% in 2019. This may suggest that digital loans and credit may not be substituting for traditional credit sources, but rather, reaching a new audience of borrowers. This new set of audience may be dissatisfied with existing credit options or unable to obtain credit at the size and terms they needed.
A comparison of borrowing and savings trends can be shown below:
Currently, loans are mainly used for consumption and savings for investments as shown below:
- There are now more smarphones in Kenya than ATM cards.
- Nearly 1 in 2 Kenyan youth own a smartphone able access the Internet
- Use of chamas as savings devices has dropped significantly
- Formal and informal borrowing are predominantly used for consumption
- Cash is still king but digital payments are growing
- 54% of Kenyans are using digital wallets to save
- A lack of transparency is the second most mentioned challenge for bank users
- Loan defaults is highest among those borrowing from shopkeepers (45%) compared to mobile bank loans (18%) and digital loan apps (9%)
- Education is the top priority for Kenyans followed by putting food on the table for the poor and investing in livelihoods for the wealthy.
- Overall, formal solutions play a limited role in meeting needs but significant for investment.
- While 83% have formal accounts, only 22% of Kenyans are considered financially healthy down from 39% in 2016
- Over half the population claim their financial situation has worsened since 2016
- Over half of the wealthiest are financially healthy but 95% of the poor are not, suggesting high levels of economic inequality