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Financial Inclusion in Kenya : The M-Pesa Success Story

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Financial Inclusion in Kenya : The M-Pesa Success Story

Kenya stands out as one of Africa’s most inclusive countries in terms of financial services, with M-Pesa leading the way as a true success story.

Understanding Financial Inclusion in Kenya

Financial Inclusion

Financial inclusion is defined as the access of the population to affordable and sustainable financial products and services. According to the World Bank, having a financial account, such as a bank account, is the most important component of financial inclusion. This is one of the reasons why the World Bank is focusing on it through its « Universal Financial Access 2020 » initiative. However, despite the efforts of this initiative, there is still much to be done, underscoring the importance of the issue.

According to the Alliance for Financial Inclusion (AFI), financial inclusion encompasses the accessibility, use and quality of financial services.

Case of Kenya

A report published by the FinAccess Household Survey ranks Kenya as one of the most inclusive countries in terms of financial services. The document shows that approximately 90 % of Kenya’s adult population has access to financial services.

The variables considered for financial inclusion in Kenya include access, use and innovation of financial services and products. For the first criterion, which measures access, the percentage of the Kenyan population with access to financial services was 26.7 % in 2006, increasing to 82.9 % in 2019 and 83.7 % in 2021. In terms of usage, the report shows a decline in the percentage of this parameter, from 32.1 % in 2006 to 6.1 % in 2019 and further to 4.7 % in 2021. The study also shows a decline in innovation: from 8.3 % in 2019 to 2.1 % in 2021.

Financial Inclusion Key Actors

The value of mobile money transactions is expected to increase by 63.2 % in 2021. This increase is a result of government policies aimed at promoting the use of mobile money to curb the spread of the COVID-19 pandemic. The government is increasingly committed to inclusive policies to boost the country’s economic growth.

M-Pesa’s impact on financial inclusion

M-Pesa: An online money transfer tool

M-Pesa has become a true success story in Kenya, serving as a pillar of the Kenyan economy, creating 180,000 jobs and accounting for 8 % of formal employment in the country.

The M-Pesa platform plays a critical role in providing financial services to the unbanked, leading to a significant increase in financial inclusion rates. Indeed, M-Pesa has successfully reached a large portion of the Kenyan population that did not have access to traditional banking services.

In addition to increasing financial inclusion, M-Pesa has had a significant social impact, particularly in low-income communities. By leveraging the widespread use of mobile phones, M-Pesa has provided a convenient and accessible platform for individuals to conduct financial transactions.

How M-Pesa Works

The growth of mobile money use in sub-Saharan Africa has been spectacular, with M-Pesa being the most popular in Kenya. Launched by Safaricom in March 2007, the platform – where « pesa » means « money » – now operates in 10 countries, including Kenya, Tanzania, Mozambique, the Democratic Republic of Congo, Lesotho, Ghana and Egypt. In total, it has more than 30 million users who process 614 million transactions per month. It has 51 million subscribers, 465 businesses, 600,000 agents and 42,000 developers.

The company plays a critical role in financial inclusion. With just a SIM card, customers can make money transfers or send money. It partners with various companies, merchants and financial institutions to expand its operations.

A study by MIT found that M-Pesa helped reduce poverty in Kenya by 2 %, or 250,000 people. The Central Bank confirmed this by stating that M-Pesa has improved financial inclusion in Kenya, making it a leader in the sector.

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