Mainstream banks are being given a run for their money by mobile money banking in Kenya according to the financial access research done by FSD Kenya in July 2019. The research also shows that over 80% of the Kenyan populace are now financially included, representing a triple reach in just over a decade. This means that only about 11% do not use financial devices at all even as the informal sector contributes much of this figure.
Noting that the high cost of financial transactions is still a huge hurdle to complete financial inclusion, the report divided the country into 13 regions with the capital, Nairobi leading at 96% financial inclusion, Mombasa at 94% and the Central Rift being second runner up at 88%. The most improved of regions was the North Eastern, where inclusion jumped from 25% three years ago to 84% this year, mainly boosted by remarkable mobile money penetration in the arid region.
In as much as micro loan offering mobile apps are popular, a reverse was revealed by the report in that their penetration only stands at 8% even as mobile financial services offered by telcos take the biggest share at 79%. Banks offering loans through apps have managed to lure just about 25% of the population while the National Hospital Insurance Fund (NHIF) managing only 1% more thank the banks.
Sacco’s and micro-finance institutions provide just over one in ten Kenyans with financial services. One third of the formally included Kenyans rely solely on a mobile wallet, the report reveals. Even though the consumers are far from satisfied with the cost, at least 75% of the respondents complained about the high rates charged. Mobile money services from telcos seem to be a little more affordable than banks but close to 57% of the respondents thought it could be lower.
According to the report, 40% of Kenyans earn a monthly salary of 12,700, being far away from being sufficient to be in the category of this financially included. Users also believe service providers have hidden charges that cumulatively make transaction costs high. The use of cash for payments still remains most prevalent payment method in the country with 98% of the population paying daily expenses in cash, 67% on monthly bills and lastly 66% on school fee.
The research notes that digital payment of incomes is on the rise among farmers and other business people and so is formal digital savings. Loan defaults appear highest among local user and shopkeepers at 45% compared to mobile bank loans standing at 18% and digital loan apps at 9%. Borrowing trends have risen across all channels meaning mobile digital loans are not sufficient to satisfy daily needs.
Check out our previous article on the true usage of mobile digital loans in Kenya to find out more about this subject and stay informed of the current market trends in the FinTech space.
