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Financial services access hits 67pc on mobile payments

A customer pays for goods at a kiosk in Nairobi via M-Pesa mobile money service. Safaricom launched Lipa na M-Pesa campaign to boost use of its payment services. Central Bank says mobile money has boosted access to financial services. Photo/Salaton Njau
A customer pays for goods at a kiosk in Nairobi via M-Pesa mobile money service. Safaricom launched Lipa na M-Pesa campaign to boost use of its payment services. Central Bank says mobile money has boosted access to financial services. Photo/Salaton Njau 

Two thirds of Kenyans are now able to access formal financial services indicating increased deposit mobilisation in the country following success in mobile payment services and increased penetration by commercial banks.

FinAccess, a Central Bank of Kenya-linked survey, shows last year 35 per cent of Kenyans were included in the banking segment while 32 per cent have access to other formal financial services.
These include the mobile money platforms, micro-finance institutions and saccos.

In 2009, less than half of the bankable population, 40.5 per cent, had access to formal services. 

Access to financial services is a key policy in poverty eradication as it allows for accumulation of capital through savings and affordable credit for investment besides making monetary transmission more effective.

“Mobile phone financial services platform has provided an opportunity — to reach mass markets efficiently and effectively being a platform to save, receive credit with ease and invest,” said CBK governor Njuguna Ndung’u.

“Potential for growth in financial services remains high given the significant proportion of population excluded or accessing informal finance.”

The recent survey, which is yet to be officially released by the Central Bank, shows that a quarter of the bankable population are excluded from access of any financial services while 7.8 per cent only use informal systems that include chamaas (investment clubs).

The number of those excluded shows that there is room for innovations and investments in the financial sector which also include insurance and pension sectors.

“The growing inclusion is also an indication of improving economic conditions as the poorer an economy is, the lower the banking penetration,” said Francis Mwangi, head of research at Standard Investment Bank.

Kenya has the highest population in Africa accessing formal financial services which is attributed to mobile money.

In June, telcos provided more than 60 million transactions valued at Sh153 billion with average amount of transactions per customer being Sh6,421 compared to Sh3,067 in March 2007.

M-Shwari, a product of Commercial Bank of Africa and Safaricom, had issued more than four million loans worth about Sh4.2 billion in the nine months after it was launched in November last year, indicating ability of the mobile platform to increase access to credit.

M-Shwari gives loans as low as Sh100 while some have been able to access as much as Sh8,000.

Introduction of agency banking, which allows banks to use third parties such as shopkeepers to offer a number of banking services, has also increased the number of banked population. As at the end of June there were 19,649 authorised bank agents who had made transactions valued at more than Sh310 billion.

Prof Ndung’u has made financial inclusion a key agenda during his tenure that begun in 2007. In 2006, only a quarter of the bankable population had access to formal banking services.

Credit uptake

The number of deposit accounts has risen to 19.9 million from 2.8 million in 2007. The governor, however, bemoaned the slow growth in credit uptake with the number of loan accounts having grown only three fold in the same period to 3.8 million accounts.

Growth of deposit accounts is attributed to reduced costs of maintaining accounts while banks have increased their branch network to 1,272 from 996 branches in 2009.

Saccos and micro-finance institutions, classified as formal other, have had stringent rules imposed on them as the government sought to regularise their operations and ensure stability in the financial sector.

This has seen them formalise their operations and grow astronomically with some of them now allowed to accept deposits from the public.

The government has also introduced revolving funds to help Kenyans who had been excluded from access of credit services.

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