About two decades ago, big banks in Kenya could gladly cherry-pick and retain only the high-end customers, leaving the majority unbanked and dependent on exploitative money-lenders or informal savings clubs.
How times have changed! Today, Kenyans now can not only choose from a wide range of financial institutions catering to the lowest of income customers, but the big banks have also been forced to go down-market. This came about as a result of the rise in micro-finance institutions and savings and cooperative societies, but in most part due to innovations in technology and digitization of financial services.
In 2007, mobile money, M-PESA for short, was introduced in Kenya by the country’s biggest mobile network, Safaricom Limited, as a simple way of repaying micro-loans via cell phone. Since then, this innovation has spread widely throughout the country, with the financial sector now delivering sundry business models, including the use of mobile agents in lieu of bank branches to increase access and reduce operational costs.
Today, city dwellers no longer have to make long trips to their rural homes to pay school fees for their children or give money to their relatives who are in need. At the macro-level, the Central Bank of Kenya now has a greater opportunity to leverage its control over the money supply, and at same time the mobilisation of savings amongst the population is being encouraged.
In 2015, the World Bank Group released a report that stated that between 2011 and 2014, 700 million adults became account holders while the number of those without an account, the unbanked, dropped by 20 percent to 2 billion. The report says that of the top 20 countries in the world for mobile money usage, 15 are in Africa, and that East Africa alone, led by Kenya, has 80 per cent of the world’s mobile money transactions.
In Kenya there are 26.3 million mobile money users (about 60 percent of the population) according to the Communications Authority of Kenya.
Kenya can take advantage of this leadership to push its pursuit for socio-economic transformation towards both Vision 2030 and the Sustainable Development Goals (SDGs). A cashless economy accelerates financial inclusion, which dovetails well with the SDG objectives of ending poverty, reducing inequality and achieving gender equality.
Deeper financial inclusion can help Kenyans move out of poverty. A recent report from the McKinsey Global Institute found that the use of digital finance could increase the GDP of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025, and thus create up to 95 million new jobs across all sectors of the economy.
These gains will be realised sooner when we put in place purposed policies and programmes that target gender gaps in financial inclusion. That is, a better provision of financial services to women would better empower them economically but also politically and socially.
Increasingly, Kenyan households are headed by women, who need support in the face of a wide range of constraints that hamper their access to financial services. These challenges include lack of financial literacy and lack of property rights that can be accepted as collateral.
Mobile money transactions are very well placed to overcome some of these challenges, especially for small transactions that many women entrepreneurs in the informal sector would need.
We believe that strategic partnerships involving the Government of Kenya (at national and county levels), the private sector, the United Nations Development System and other development partners can make good headway in instituting legal and regulatory frameworks for comprehensive financial inclusion through cashless economy.
Through this joint effort, millions of Kenyans can be beneficiaries of the development dividends of increased economic growth and financial inclusion realized through cashless economy, hence lifting millions of Kenyans out of poverty and making giant steps towards the SDGs.
Co-authored with Ralf Heckner ,the Swiss Ambassador to Kenya and Dhiren Chandaria, CEO Insta Products.