Kenya’s fintech revolution has helped the country achieve near total financial inclusion, but are consumers really benefiting and are they adequately protected? Tom Collins investigates.
Positioned as one of Africa’s top performing economies, growing at a predicted 6% this year according to the latest African Development Bank (AfDB) figures, Kenya has led the continent in financial inclusion for well over a decade.
According to the 2019 FinAccess Household Survey, put together in collaboration with the Central Bank of Kenya, Kenyan National Bureau of Statistics and FSD Kenya, 82.9% of the adult population has access to at least one financial product.
South Africa, Uganda, Rwanda and Nigeria follow close behind as financial inclusion leaders on the continent. The Kenyan marketplace boasts approximately 150 fintech companies at any one time, with services ranging from digital credit entities to remittances and transfer platforms.
Financial inclusion, bringing the ‘unbanked’ into formal finance, has been a key development push in emerging markets as the process involves finding innovative ways to provide financial products to traditionally risky segments which will ultimately drive economic growth through well-financed small and medium enterprises (SMEs).
Feeding into the UN’s 2030 sustainable development goals (SDGs), financial inclusion is expected to act as an enabler for many of the objectives including eradicating poverty, ending hunger, achieving gender equality and the economic empowerment of women.
However, as Kenya approaches almost total financial inclusion, the conversation changes from one of access to value: are the many financial products benefitting the population and is the sector well-regulated enough to ensure consumers are protected?
From a development perspective, financial inclusion is by no means the end goal. The right environment
Kenya has been able to leapfrog in terms of financial inclusion due its positive regulatory environment and attractive macroeconomics.
Wayne Hennessey-Barrett, CEO and founder of 4G Capital, a fintech mixing credit training with unsecured loans to achieve an 94% repayment rate, says Kenya’s “pro-business environment” has allowed financial innovation to flow. Compared to other African markets, Kenyan regulators made the policy framework necessary to breathe life into Safaricom’s fledgling M-Pesa in 2007.
Thanks to its success, Safaricom is East Africa’s largest and most profitable telecommunications firm, contributing around 5% to Kenya’s GDP.Innovating further still, Kenya is in the process of introducing a regulatory fintech sandbox which sets the conditions for early stage fintech regulation.The Capital Markets Authority (CMA) will use the sandbox to “create a conducive environment to unlock the potential of the fintech […]