Mobile apps lift access to financial services

Concerns, however, remain on the cost of money transfers

Kenyans’ access to the formal financial sector has more than doubled in the past decade, largely driven by mobile banking and lending apps.

New data from the 2019 edition of the FinAccess Household Survey further indicates that the number of Kenyans excluded from formal finance has narrowed to just 11 per cent of the population.

“These developments could be attributed to the introduction of mobile financial services in 2007, followed by increased partnerships and innovations such as mobile banking, agency banking, digital finance and mobile apps,” said the FinAccess report released yesterday in part.

According to the study conducted by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS) and Financial Sector Deepening (FSD), formal financial inclusion has risen to 82.9 per cent, up from 26.7 per cent in 2006, while complete exclusion has fallen to 11 per cent, down from 41.3 per cent in 2006.

Gaps in informal financial access between the genders and rural and urban dwellers have also declined to six and 14 per cent, down from 11 and 12 per cent respectively.

The study also found a rising concern that the cost of digital finance services was eroding these gains, pushing more low-income earners in the country to borrow and save in informal channels such as investment groups (chamas).

“Despite the progress made so far, affordability and consumer protection issues such as unexpected charges remain barriers to formal service access,” said the report.

“Even more notable is the considerable modesty of the developmental impact of formal financial access. Many Kenyans have formal accounts in various forms, but these accounts are rarely used because they are not solving real day-to-day problems for many households, smaller and microscale businesses and farmers.”

At least 70 per cent of those polled said they had borrowed money from at least one investment group in the last 12 months, with the rest reporting to have borrowed from more than one group.

Another 30 per cent of the respondents, on the other hand, said they saved their money in investment groups, with another 23 per cent using a “secret hiding place.”

Mobile money also ranked highly as a favourable saving channel, with 53 per cent of Kenyans reporting to have saved funds in their mobile money accounts.

At the same time, the study found microfinance institutions had reported a decline in use on the back of growing popularity of mobile lending.

“Strong growth in uptake of digital apps loans from 0.6 per cent in 2016 to 8.3 per cent in 2019 indicates the role unregulated service providers are playing in financial services,” explained the report.

Kenyans also appeared to favour more than one financial service, with 73 per cent saying they used both traditional and mobile money platforms, highlighting the growing convergence between banks and mobile money service providers.