Survey: Youth still face financial exclusion despite sector reforms

Rural youth represent the largest segment of financially excluded Kenyans, with 45.5 per cent affected.

The primary barriers cited include a lack of mobile phones (64.1 per cent) and IDs (National Identity Cards) (51.5 per cent), which hinder their access to digital banking services. 

The 2024 FinAccess Household Survey Report reveals that overall, 9.9 per cent of Kenyan adults remain financially excluded.

The report, released collaboratively by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics, and Financial Sector Deepening Kenya (FSD Kenya), highlights Kiambu, Nairobi, Kirinyaga, Nyeri, Isiolo, and Mandera as the most financially inclusive counties.

Conversely, Turkana, West Pokot, Elgeyo Marakwet, Trans-Nzoia, Migori, and Narok are identified as the most excluded regions.

Despite these challenges, formal financial access has risen from 83.7 per cent in 2021 to 84.8 per cent in 2024, largely fueled by advancements in digital technology that have helped close the gender gap in formal access.  

The report indicates that while the uptake of traditional bank accounts and Savings and Credit Cooperatives (Saccos) has increased, growth in digital services has shown mixed results. Mobile money, mobile banking and Fuliza (a credit facility by Safaricom) have experienced moderated growth, whereas digital microfinance institutions (MFIs) and services like “buy now, pay later” have seen increased adoption following regulatory changes.

The narrowing financial access gaps across demographics signify progress in addressing inequalities, particularly gender disparities, which have now decreased to less than two per cent. However, notable disparities persist among counties, and the exclusion of rural youth remains a pressing concern.

Ongoing consumer protection issues and rising debt stress are additional challenges that need urgent attention. The report emphasizes that improving financial health should be a priority for policymakers, researchers, and other stakeholders who can utilise these insights to meet diverse community needs.

Identification Cards

The survey indicates that young people aged 18-25 and seniors over 55 continue to be the most excluded from financial services this year, consistent with findings from 2021.

Specifically, the exclusion rate for the 18-25 age group was 23.1 per cent in 2024, up from 22.5 per cent in 2021. The lack of National Identification Cards among this demographic significantly contributes to this high exclusion rate. Of the 2.3 million individuals without IDs, 1.9 million (83.4 per cent) are aged 18-25, with 72.1 per cent of 18-year-olds lacking IDs, as they can only obtain one upon turning 18.

The survey also notes a decline in the use of the National Hospital Insurance Fund (NHIF), possibly due to the transition to the Social Health Insurance Fund (SHIF), while participation in the National Social Security Fund (NSSF) has seen a slight increase due to the lifting of the NSSF Act (2013).

Additionally, the use of securities has grown with the advent of mobile applications.

According to the survey, 52.6 per cent of Kenyans now use mobile money daily, a significant increase from 23.6 per cent in 2021, reflecting the growing digitisation of payment methods.

The gap in access to formal financial services between males and females narrowed to 1.6 percentage points in 2024, down from 4.2 percentage points in 2021, although the overall uptake remained low during the 2019-2024 period.

 The gender gap in exclusion rates has also decreased to 0.2 percentage points in 2024, compared to 1.6 percentage points in 2021.

However, a higher percentage of women still rely on informal channels for financial services, with 5.9 per cent accessing only informal options in 2024, down slightly from 6.0 per cent in 2021.Meanwhile, access through informal channels for men increased from 3.2 per cent in 2021 to 4.5 per cent in 2024.

This reliance on informal channels by women may reflect ongoing gender inequalities, including barriers like lack of collateral, financial literacy, and identification issues.

While credit usage has risen to 64 per cent, the proportion of savers has declined to 68.1 per cent for the first time since 2009.

The Hustler Fund, a government-run financial service, has seen rapid uptake, with 28 per cent of the population borrowing from it, particularly in urban areas where higher-income populations are more likely to engage with it.

 Debt distress is a growing concern, with 16.6 per cent of borrowers defaulting entirely on their loans, compared to 10.7 per cent in 2021.

The survey also highlights system downtime as a significant issue for consumers, with users of MFIs and digital apps facing unethical practices and hidden charges. Notably, 9.8 per cent of mobile money users reported losing money.

Despite these challenges, 42.1 per cent of the population is considered to have high financial literacy, successfully answering questions on inflation, interest rates, and risk diversification. Financial health remains low, with only 18.3 per cent of Kenyans classified as financially healthy, an increase from 17.1 per cent in 2021.

While there has been progress in managing day-to-day finances and coping with shocks, fewer individuals are able to invest in their futures.

The survey also notes that 34 per cent of the population is involved in some form of green investment, with solar equipment and tree planting being prominent, primarily financed through personal income, social networks, and savings.

Financial inclusion for Persons with Disabilities (PWDs) averaged 77.9 per cent, which is lower than the national average of 84.8 per cent, with only seven per cent classified as financially healthy.