Financial inclusion in kenya has increased, but farmers are likely to remain excluded according to the 2017 global findex database, 81. Improving financial inclusion through data for smallholder. A recent finaccess research dated july 2019 by fsd kenya shows that 83% of the kenyan population is now formally financially included as of 2019 the report however reveals that cost remains the major barrier to further financial inclusion and adoption of financial services formal inclusion in 2019 by region in kenya stands as follows. This paper interrogates various measures and definitions of financial inclusion fi and their cumulative distribution in kenya. By fall 20, more than 50 nationallevel policymaking and regulatory bodies had publicly committed to financial inclusion strategies for their countries world bank 20a, afi 20. The financial system in kenya still remains underdeveloped as compared to. The regulatory lessons michael klein and colin mayer. It highlights differences among the 4 countries and their financial regulatory environment. This paper uses a novel, threestep probit analysis to identify. Our financial inclusion programmes work to make financial markets more inclusive by extending access to services for the unbanked and deepening their usage. This article examines the impact of microfinancethe provision of financial services to poor and lowincome populations, usually in the global southon poverty.
Effect of agency banking on financial inclusion in kenya. Finaccess 2006 revealed that the level of financial exclusion has fallen from 38. Because account ownership is nearly universal in highincome economies, virtu ally all unbanked adults live in developing economies. The world bank group plays a critical role in advancing financial inclusion in the world since it can leverage its financial sector expertise, country engagement and dialogue, financing and risksharing instruments, unique datasets and research capacity, and influence with standardsetting bodies and the g20. The population of the study comprise all the micro small and medium size. The importance of financial inclusion bringing smart policies to life 7 evidence around the globe financial inclusion has made a difference empirical evidence from the world bank national evidence s across different regions kenya and financial inclusion level of financial inclusion in kenya kenya is leading the way.
Pdf measures and distribution of financial inclusion in kenya. Lessons from latin america and caribbean maria luisa hayem, andrea reyes, ana maria torres. We pay special attention to rural markets, agribusinesses, youth, women, and msmes. The study adopted a descriptive statistics and used secondary data from the central bank of kenya. Financial inclusion and datasets cbk central bank of kenya. Behavioural determinants of financial inclusion in uganda rachel mindra katoroogo student no. The state of financial inclusion in kenya july 2019. Various countries are promoting financial inclusion across the world. Given the fast pace of financialsector development in. Financial inclusion and datasets central bank of kenya. Data analysis entailed collection of data, compilation and.
Binyam teshomeworld bank the world bank group wbg, with private and public sector partners, set an ambitious target to achieve universal financial access ufa by 2020. Mobile financial services such as mpesa in kenya are said to promote. However, improving financial inclusion will be easier in some markets than others. Proponents hope that the financial inclusion of poor and. The effect of financial innovation on financial inclusion in.
Womens economic empowerment through financial inclusion. The relationship between financial inclusion and gdp. Center for financial inclusion publication 12 opportunities and obstacles to financial inclusion the center for financial inclusion pursues the proposition that lowincome people deserve highquality financial services and that these services can best be provided through commercial models that incorporate social purpose. The little data book on financial inclusion 2018 is a pocket edition of the global findex database published in 2018. On the supply side, formal financial services are accessed through traditional.
Kihiu research department, central bank of kenya box. Given the fast pace of financial sector development in. This has been echoed by international as well as national bodies. Financial inclusion indicators for rural and urban population in africa 85 figure v. Do the mpesa rails contribute to financial inclusion. Download the little data book on financial inclusion. While mpesas rails offer the potential, kenya may yet have to wait to realise comprehensive, commercially sound, affordable and effective financial inclusion.
The 2015 brookings financial and digital inclusion project report measuring progress on financial access and usage by john d. Jun 18, 2018 the government of ethiopia, with the support of wbg, launched a national financial inclusion strategy nfis. Innovative factors that affect financial inclusion in. A new world bank report on the use of financial services also finds that men remain more likely than women to have an account. Banking, regulation, microfinance, payments system, mobile money. The database provides nationally representative, demandside data on access. Abstract this study investigates the effect of financial inclusion on the performance of micro, small and medium size enterprises in kankia local government of katsina state. The study was based on secondary data from the cbk. The global findex database is the worlds most comprehensive set of data on how people make payments, save money, borrow and manage risk. Financial inclusion is a step toward inclusive development. We then merged the branching data set with nationally representative household surveys of financial usage conducted by the financial sector deepening trust kenya fsd kenya in 2006 and 2009.
Measures and extent of financial inclusion in kenya. G20 financial inclusion indicators kenya the world bank. Whereas financial inclusion is defined as universal access, at a. Financial inclusion involves the delivery of financial services at an affordable cost to all segments of society. This is illustrated through a basic measure of financial inclusion. Account penetration in african fragile states % 97. Dynamics of financial inclusion and welfare in kenya. In ethiopia, women account for a disproportionate share of the unbanked, and the gap is widening. Financial regulations for improving financial inclusion. Michael klein is professor at the frankfurt school of finance and management and senior visiting professor at. Access to a transaction account is a first step toward broader financial inclusion. Regulatory impact on mobile money and financial inclusion. Behavioural determinants of financial inclusion in uganda. Financial inclusion is a necessary condition for financial deepening, which helps to address the basic issue of growth with equity.
A recent finaccess research dated july 2019 by fsd kenya shows that 83% of the kenyan population is now formally financially included as of 2019 the report however reveals that cost remains the major barrier to further financial inclusion and adoption of financial services. Kenya, the finaccess survey constitutes an important tool for monitoring financial inclusion trends and. This suggests that policy to promote financial access should look beyond formal financial services, to provide a supportive environment for other forms of provision, while also protecting consumers. The g20 made the topic one of its pillars at the 2009 pittsburgh summit g20 2009. The sample size was kenya banking sector comprising of banks out of44 commercial banksas at december 2014. The center for financial inclusion cfi is an independent think tank housed at accion that works to better serve, protect and empower clients. Pdf financial inclusion and financial sector stability with. Pdf measures and distribution of financial inclusion in. In rural areas, this figure is slightly lower at 81.
Microfinance is regarded as a financial market solution to the social problem of poverty, promising poverty alleviation in a marketfriendly and costefficient way. In 2017, more than seven in 10 adults were financially included 73%. Regulatory impact on mobile money and financial inclusion in. Accenture mpesareached 80% of households in kenya within 4 years source.
Banks can reach out to the underprivileged sections of society by partnering with governments and making financial services available at a nominal cost. Fintech innovations have improved several financial inclusion indicators in kenya, and helped reduce many of the transaction costs of reaching rural populations. The 2006, baseline survey and the subsequent surveys of 2009 and 20, have shown that kenya has made significant progress in fostering financial inclusion, with the latest survey providing a ten year perspective on kenya s financial landscape. Wdr 2016 digital technologies have spread rapidly in much of the world, yet, there is potential to boost digital dividends.
Role of banks in financial inclusion in india sciencedirect. Globally, only 58 percent of women hold an account in a formal financial institution, compared to 65 percent of men demirguckunt et. Financial inclusion is defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost rangarajan, 2008 in the report of the committee on financial inclusion in india. South africa is 1% away from its national development plan goal of 90% financial inclusion.
Kenya has the highest share of adults with a mobile money account, at 58 percent, followed by somalia, tanzania, and uganda with about 35 percent. Sangeetha, kapil sai koushik abstract the unbanked population is a sizeable market at the base of the pyramid. A high level conference on kenyas economic successes, prospects and challenges. This paper uses a novel, threestep probit analysis to identify the sociodemographic characteristics of, successively. The headline indicator for the strategy is to increase the percentage of adults with a transaction account from 22% in 2014 to 60% in 2020. How a riskbased approach can inform technology choices 27 4. National financial inclusion strategy 20172022 xi executive summary this national financial inclusion strategy nfis is a renewed commitment to financial inclusion in zambia and builds on previous efforts and ongoing initiatives by government. Financial inclusion can help reduce poverty and inequality by helping people invest in the future, smooth their consumption, and manage financial risks. Financial inclusion and financial sector stability with reference to kenya. The transformative role of technology issa faye and thouraya triki dfis support to financial inclusion in africa isabella massa the tradeoff between financial inclusion and financial stability pietro calice financial inclusion. Measurement of financial inclusion in kenya commenced in 2006 through the creation of finaccess surveys implemented over the years by the central bank kenya cbk, kenya national bureau of statistics knbs and financial sector deepening fsd kenya. Catalyst for financial inclusion bank the unbanked with digital channels c. Impact of financial literacy on access to financial.
Financial inclusion in africa african development bank. Launched in 2011, it includes more than 100 financial inclusion indicators in a format allowing users to compare access to financial services among adults worldwide including by gender, age and household income. The effect of financial innovation on financial inclusion. A standard bankbased deposit and credit service offered via mobile means 23 4.
Washington, april 19, 2018 financial inclusion is on the rise globally, accelerated by mobile phones and the internet, but gains have been uneven across countries. Levels of financial inclusion have increased in kenya though marginally as revealed by finaccess 2006, and ndii 2009. It further examines different regulations that have influenced the development of financial inclusion through the use of the mobile financial services in the 4 countries. G20 financial inclusion indicators pdf glossary pdf. Adults around the world and in all income groups use an array of different financial services.
The objective of the financial inclusion strategy fis peer learning group is to create a platform for afi members to develop and implement national financial inclusion strategies. Impact of financial literacy on access to financial services in kenya mwangi isaac wachira research department, central bank of kenya box 6000000200 nairobi, kenya. Sector distribution of bank credit in africa 2009 86 figure vi. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs transactions, payments, savings, credit and insurance delivered in a responsible and sustainable way. Pdf this paper interrogates various measures and definitions of financial inclusion fi and their cumulative distribution in kenya. Financial inclusion can really pick up the financial conditions and standards of living of the disadvantaged groups. We promote the development of financial markets that include the poor and underserved in africa and asia. Kenya leads in developing mobile money payment systems and in widespread usage, despite battling extreme poverty. Cbk regulates and supervises commercial banks, mortgage finance companies.
Mobile financial services are said to promote inclusion. The group is dedicated to supporting afi members in fulfilling commitments to the maya declaration and the g20 financial inclusion peer learning program. Access the g20 financial inclusion indicators database download countrylevel data powered by the world bank. Doc effect of financial inclusion on msmes performance. Financial inclusion and financial sector stability with. The data represent a third round of data collection since the global findex database was launched in 2011. Fortyeight institutions from 40 countries, representing all geographical regions, had become members of the fisplg by august 2015. Kenya has one of the most efficient and effective financial markets and the highest returnsonequity for banks in the african continent.
The data on number of deposit accounts, number of automated teller machines, number of registered bank agents, number of mobile money transactions. The ufa goal envisions that, by 2020, adults globally will be able to have access to a. Mobile drives financial inclusion in africa, growing 20%. Kenya continues to make deliberate efforts to increase the level of financial inclusion and strengthen confidence in the financial sector. Pesa itself does not constitute financial inclusion. The pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size respectively.