Kenya’s Leaders in the Financial Services and Savings Industry Gather in Nairobi for Joint SPINNAKER-FSD Workshop

This post originally appeared on the SPINNAKER Network.

On November 18^th in Nairobi, Kenya, the Global Assets Project in partnership with FSD Kenya held a half-day industry workshop to share initial findings from the SPINNAKER Network’s recent landscape study on savings products in the country. Jamie Zimmerman presented on the study’s initial findings to Kenya’s policy makers, practitioners, and financial institution representatives, and facilitated various discussions on salient issues related to 1) access to financial services 2) client uptake of savings products and 3) regulatory hurdles facing institutions seeking to offer savings products to the poor.

As of 2009, statistics show that in Kenya, roughly 49 percent of rural and 60 percent of urban residences currently use a savings account. While these percentages vary slightly by region (see Figure 1), they are an indication that a majority of Kenyan’s do not have access to or use a savings account. To address this gap, participants in the workshop discussed their observations or efforts in increasing access points to savings products, such as opening several additional branches. Still, others have implemented innovative delivery mechanisms, like creating banking agents where traditional bank branches cannot reach the population. While it may be too early to tell whether agents are impacting the reach and scale of savings products, there is no indication that the use of branchless banking (generally) has lessened, with respondents in the SPINNAKER study also reporting the use of debit cards, passbooks, ATMs, and mobile phones (see Figure 2), for product delivery.

Figure 1 (Source: FinAccess 2009)

Figure 2 (Source: SPINNAKER Deep Dive)

But once products are delivered, what is to guarantee their uptake? When participants broached this subject, the discussion quickly turned to whether financial education could be leveraged as an effective marketing tool to nudge demand. Here, diverging philosophies emerged on the exact purpose of financial education, with some suggesting that awareness creation and marketing not being one of them. Despite these diverging views, a representative from FSD Kenya said “there have been cases in which product uptake increases significantly with financial education. [Additionally] pairing financial education with product offerings may actually escalate usage of the account while creating more financially capable [or financially savvy] consumers.” In fact, YouthSave, a project committed to delivering and testing the effects of savings accounts on the lives of low-income youth, is taking this combined approach to advance its financial capability efforts in Kenya, Nepal, and Colombia. Equity Bank has made financial education its corporate social responsibility mandate, but the service is only offered to non-Equity clients.

Undoubtedly, one of the most cumbersome challenges highlighted during the November workshop revolved around regulatory barriers to offering savings products in Kenya. For instance, stricter regulations on banking agents compared to those imposed on Safaricom’s M-PESA (the mobile-phone based money transfer service), have made this delivery channel much more costly for banks. Already facing stiff competition with Safaricom’s near monopoly of mobile money and its vast and exclusive agent network, these higher costs make growth in agent banking much more difficult for financial institutions (see Figure 3).

Figure 3 (Source: Safaricom & Central Bank of Kenya)

Regulatory, delivery and uptake hurdles notwithstanding, the workshop also provided a common space for various industry experts to jointly discuss, debate, and present on new and innovative solutions to advance financial inclusion efforts for the poor. The Global Assets Project will detail the issues highlighted here and much more in the next SPINNAKER report unveiling the findings from its recent landscape study in Kenya. Until then, check out the Project’s latest report from the Philippines!