Financial inclusion is a crucial enabler of growth especially in achieving Kenya's Vision 2030 and attaining some of the Sustainable Development Goals (SDGs). The World Bank defines financial inclusion as when households and businesses have access to more useful and affordable financial products and services that meet their needs in terms of transactions, payments, credit and insurance delivered in a responsible, affordable and sustainable way and not credit growth.
Formal financial inclusion remains average in developing and emerging markets. In Kenya, the results of the 2019 FinAccess Households survey revealed formal financial inclusion has risen to 82.9 percent, up from 26.7 percent in 2006, while complete exclusion has narrowed to 11 percent from 41.3 percent in 2006.
This means there is an urgent need for concerted efforts that will steer the increase of financial access services.
Mobile money technology development especially M-Pesa has been a fundamental tool in enhancing significant financial inclusion mainly to unbanked and poor people. Since the launch of M-Pesa in March 2007 to the present, there has been major remarkable milestones.
For instance, a 2016 presentation during the Central Bank of Kenya 50th anniversary by late Bob Collymore, the then Safaricom chief executive, estimated that in every second of the day M-Pesa processes a loan.
Every minute, 3,900 people buy airtime while 1,500 people will receive money from their family and friends. Another 1,700 will use to pay for bills and services, while 240 will deposit or withdraw from their banks. More than 15 businesses will make payments to other firms.
To support further financial inclusion, the following need to be done;
First, financially empower women, youth and people with disabilities by financial institutions enhancing the ability of this demographic cohort to make basic evidence-based financial decisions.
Second, sound and robust institutional structure to improve and expand financial inclusion. This can be done through partnerships and participation of government agencies, the private sector, civil society and regulators.
Third, consumer protection is a key ingredient in promoting confidence in using digital financial services. Regulators of financial services have to ensure customers are treated fairly by some of the financial institutions that may abuse their information advantage to the customer's expense.
Fourth, high-level financial literacy is vital. This is because consumers who are more financially literate make better decisions such as spending, saving and borrowing, understanding their rights and responsibilities as consumers of financial products and are capable to manage risks.
For example, consumers with improved financial literacy are more likely to understand the importance of saving culture and boost savings.
Fifth, pro-consumer friendly financial infrastructure development that supports transparency and accountability of financial transactions such as credit reporting system.
It's clear access to finance is a critical enabler to economic growth and sustainable development by initiating and expanding business, investing in education, managing risk, absorbing financial shocks through insurance, expanding employment and increasing consumption power.
Davis Basweti Ombane is an economist