FinAccess Surveys in Kenya: From Data to Policy Making

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FinAccess Surveys in Kenya From Data to Policy
Making
SUDAN
ETHIOPIA
SOMALIA
UGANDA

• A presentation made at the GDN 12th Annual
  Development Conference
• Financing Development in a Post-Crisis World The
  Need for a Fresh Look.
• Parallel Session sponsored by AFI/Gates
  Foundation on Financial Inclusion Data and
  Measurement
• January 13-15, 2011
• Bogota, Columbia
• By
• Shem Ouma
• Project manager, FinAccess

TANZANIA
Indian Ocean
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Outline

• Why FinAccess?
• What has FinAccess managed so far
• Highlights from FinAccess Surveys
• Relevance for policy making?
• Conclusion

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Why FinAccess?

• Stakeholders agreed that a serious problem of
  ltd. access to financial services existed in
  Kenya among lower income rural HHs
• No reliable data existed to verify extent of
  limitations to measure progress
• Financial Access Partnership (FAP), a PPP was
  born in 2005 to champion FinAccess surveys
• FAP is a composition of public private sector
  representatives (Industry, Govt., NGOs)
• FAP has conducted the two surveys - 2006 2009

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Objectives - FinAccess

• Provide information on main barriers to access to
  policy makers, and options for reforms
• Provide a solid empirical basis to track progress
• Provide information about market opportunities to
  the private sector
• Provide data for academic research into impact of
  access to financial services on growth and
  poverty reduction

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What has FinAccess managed so far

• Conducted of nationally representative national
  financial access surveys 2006 2009
• Planning third such survey in 2011
• Benefitted Policy Makers, Industry Players,
  Research Institutions Researchers (including
  students local and abroad) and consumers of
  financial services
• Generated a database on access supply and
  demand side

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Highlights from FinAccess Surveys

• Show marked change between 2006 2009
• Most dramatic change in formal other, more than
  doubling from 7.5 to 17.9
• Change actually occurred in the MFIs category
• Huge market (gt60) for financial services awaits
  to be exploited

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Highlights from FinAccess Surveys

• Broadening deepening access
• Banks are branching out
• Proportion accessing SACCOs fell, yet SCCOs is
  most widespread
• Proportion accessing MFIs doubled from 1.7 to
  3.4 although still remaining small
• Mobile money transfer services leading expansion
  of financial inclusion

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• Financial inclusion into formal and formal other
  strands is directly related to poverty levels
• In largely rural provinces, Nyanza, North
  Eastern, Western, Eastern, Coast, and Rift Valley
  poverty levels are high and financial inclusion
  low
• Given that agriculture is largely a rural
  phenomenon, most farmers are excluded from formal
  and formal other financial services
• Expanding access to affordable financial services
  is a tool to fighting poverty

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Highlights from FinAccess Surveys
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Relevance for Policy Making

• Seen to be twofold
• National Policy formulation level
• Industry level
• National Policy Level
• Knowledge from FinAccess Data on low level of
  financial inclusion (FI) spurred policy reforms
  to expand FI, e.g., through
• Introduction of Agent Banking by amending the
  Banking Act in 2009. Its uptake since its
  operationalization in may 2010 has been
  phenomenal with 2 banks contracting over 5,800
  agents. It has overcome rigidities that brick
  mortar branches face to provide financial services

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Relevance for Policy Making

• National Policy Level
• Licensing regulation of DTMFIs through the
  Microfinance Act, 2006. 4 DTMFIs licensed so far
  (Faulu, KWFT, Uwezo, SMEP). As at 30 November
  2010, the licensed DTMFIs had a total branch
  network over 35. The value of total deposits and
  loans stood at KSh 7.89 billion (1,007,615
  deposit accounts) and KSh 15.97 billion (518,308
  loan accounts), respectively
• Creation of CRBs in 2009 enabled sharing of
  credit information and improve access to credit,
  esp. to the MSMEs and individuals, who comprise
  the majority poor and whose desire to borrow had
  been constrained by lack of physical traditional
  collateral

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Relevance for Policy Making

• National Policy Level
• Enactment of the SACCOs Act, 2008 to govern
  conduct of deposit taking SACCOs with Front
  Office Service Activities (FOSA), which offer
  bank-like services that include savings,
  deposits, debit cards, advances, and money
  transfers. The Act further provided for the
  establishment of the SACCO Societies Regulatory
  Authority (SASRA) to provide regulatory and
  supervisory oversight for the deposit taking
  SACCOs (203 in total). SASRA became operational
  in 2009.

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Relevance for Policy Making

• Industry Level
• Enhanced collaboration amongst Telcos banks to
  offer technology laden financial services offered
  through new channels that would not have been
  offered before
• M-Pesa Mobile money transfer platform for
  Safaricom
• M-kesho Money transfer Agent banking platform
  for Equity Bank provided by Safaricom
• Iko Pesa Money transfer Agent banking
  platform for Equity Bank provided by Orange
  Telecom
• Obo Pay Money transfer Agent banking platform
  for Equity Bank provided by Essar (YU) Telcom
• KCB Connect Money transfer platform for KCB
• Pesa Pap Mobile money transfer platform for
  Family Bank

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Relevance for Policy Making

• Industry Level
• Introduction of Shariah compliant/Islamic banking
  products in Kenyas banking industry to bring the
  excluded based on religion into formal banking.
  Islam prohibits receipt or payment of interest.
• Two banks, i.e., Gulf African Bank and First
  Community Bank become compliant in 2007/2008,
  have opened 32 branches and 1,768 loan accounts
  with an aggregate Outstanding Loan Balance of
  KSh. 8.47 billion (USD 106m) as at 31st July 2010
  and over 48,000 deposit accounts totalling KSh.
  11.2 billion (USD 140m) as at 30th June 2010.
  Islamic banking, therefore, is expanding
  financial.

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Indications that FI is being enhanced
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Conclusion

• FinAccess provides impetus for financial
  inclusion by identifying glaring gaps in
  financial services provision and access
• It has been catalytic to policy and legislative
  reforms as well as product and processes
  innovations
• Level of access to affordable financial services
  to Kenyans has thus increased significantly
• FinAccess data informs policy, product and
  processes reforms to expand FI

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THANK YOU

• www.fsdkenya.org/finaccess
• www.centralbank.go.ke
• shemao_at_centralbank.go.ke