Financial Inclusion – The Kenyan Case
ByStephen Mwaura Nduati
Head, National Payments SystemCentral Bank of Kenya
EFINA INNOVATION FORUM:GLOBAL PESPECTIVES ON FINANCIAL INCLUSION
November 4, 2010Lagos, Nigeria
Outline• Internet• Internet usage in Africa• Financial Access in Africa• Challenges• Mobile phone financial services• The Case of Kenya• Enabling Environment• Way Forward
2
Internet
World Internet Penetration Rates
4
Internet Users in the World
5
Internet usage in Africa
6
Internet Points of Presence In Africa
Top 10 Internet Usage in Africa
8
Financial access
9
Financial Access strands in Africa (www.finscope.co.za)
10
Financial access strand
11
Source: Finscope South Africa
Payment landscape in Africa• African countries are generally, less developed with high
unbanked populations, unemployment rates, illiteracy and poverty
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Challenges
Poor infrastructure
14
Difficult terrain
15
High adult illiteracy
16
Poverty
17
But Africa has the highest mobile growth rate in the world
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Mobile phone financial services
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Benefits of the mobile phone
• Affordability• Wide reach• Use for utility payments• User friendly• An opportunity to marshal deposits outside
the banking system
20
Comparing the mobile phones with alternatives
Quicker98%
Slower2%
More convenient
96%
Less convenient
4%
Safer98%
Less safe2%
Cheaper96%
More expensive
4%
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Speed Convenience
Safety Cost
Mobile phone financial services….
Mobile phone financial services
mBanking
mPayments m…..
mInsurance
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Types of mobile phone financial servicesAD
DIT
IVE
MO
BILE
PH
ON
E M
OD
EL
• Additive mobile phone model– Bank led– Added service to existing customers
• Transformational• Non bank led• Introduction of new entities• Reaches out to the unbanked
Bank
Mobile Service providerTRAN
SFO
RMAT
ION
AL
MO
BILE
PH
ON
E M
OD
EL
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Mobile phone banking (M-Banking)Additive
Access to a customers account via the mobile phone
Bank • Balance Inquiry • Fund Transfer • Bills Payment• TOP-UP / Reload phone• Checkbook Request • List Accounts • Change PIN request
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Mobile payments/remittancesTransformational
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The Case of Kenya
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Access To Financial Services - Kenya
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19.00%
8.00%
35.00%
38.00%
2006
Formal - Regulated banks, building societies or Postbank
Formal Other -SACCOs and MFIs
Informal - ASCA and ROSCAs
Unbanked - No formal or informal financial products used
22.60%
17.90%
26.80%
32.70%
2008
Formal - Regulated banks, building societies or Postbank
Formal Other -SACCOs and MFIs
Informal - ASCA and ROSCAs
Unbanked - No formal or informal financial products used
Source - National Survey on Access to Financial Services in Kenya
010,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
GROWTH IN USAGE 1999 -2009
0
200
400
600
800
1000
1200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
No
of B
ranc
hes
GROWTH IN BANK BRANCHES
0200400600800
100012001400160018002000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Number of ATM machines
Va
Vo
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
RTGS (KEPSS)ACH (Cheques)
ACH (EFTs)ATM
MOBILE
64,810 7,000
1,136 2,852
1,993
3,422 70,647
34,709
499,703
868,226
Throughput Comparison Across Various Payment Systems In Kenya
Value (m) Volume
High value payment system
Retail payment systems
Local Money Transfer After M-pesa
Source: FSDK presentation (2009)
30
Why Mobile Money Transfer
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70%
30%
Addressable Mobile Market
Mobile Penetration
People without Mobile Phones
19%
81%
Banked Population
Banked
Unbanked
Only 19% of Kenyans have bank accounts but many more have access to a mobile phone & the gap is widening
M-PESA: Growth
Growth of M-PesaUSERS
(millions)
Growth of
M-PesaAGENTS
09/2010:More than
12.7 millionregistered M-PesaUsers
09/2010:More than
20,000M-PesaAgents
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0.00 2.00 4.00 6.00 8.00
10.00 12.00 14.00
Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep
2007 2008 2009 2010
Total Mobile Active* customers as at end of (cumulative) million
0
5,000
10,000
15,000
20,000
25,000
Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep
2007 2008 2009 2010
Total number of agents (cumulative)
The potential for mobile phones –The case of Kenya
• 19 million own mobile phones in Kenya as at 2009• Financial sector serves 23% of the bankable
population• Deployment of mobile money transfer services (M-
Pesa) in 2007 led to 27.9 % of bankable population accessing money transfer services by 2009 and perhaps better by 2010.
• Has increased deposit accounts from 2.55million in 2005 to 12million in 2010. Transferred Ksh 68.02 billion equivalent to US$ 841 million with 28.45 million transactions
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• M-Pesa remains a low value payment system: targets the bottom population
• Mkesho launched in May 2010 has enrolled over 700,000 with over USD5 million mobilised.
• Other banking products that leverage on mobile phone technology include KCB Bank Connect and Family Bank’s Pesa Pap.
• Other mobile phone operators have also launched their mobile money products – Zain (Zap) and Essar (Yu Cash).
• Many service providers e.g. power and water have integrated their bill enquiries and payments to the mobile phone
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Enabling Environment
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Policy Framework
E-commerce
AML-CFT
Bank Agency Payment
systemsBank outsourcing
Comp-etition
Telco
regulation
EE: MOBILE PAYMENTS & MOBILE
BANKING
36
Enabling Environment: Policy Balance
Stability of the financial system
Efficiency
Broader access
Financial
integrity
Consumer protection
& choice
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What is the role of the private sector?
What is the role of the Government?
What is the role of the central bank?
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Possible roles for policy makers
• Regulator
• Supervisor
• Standard setter
• Information gatherer
• Facilitator
• Coordinator
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Strategic Approach
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Innovative Payment Systems
Strategic Approach
Industry Payment
Body
National Payment
Data
Payment Legislation
Infrastructure & Standards
Cross Border
Connection
The need for cooperation and coordination in the payment market
The need for payment system data to support decision and policy making
The need for an explicit legislation on payment systems to safeguard financial stability
To develop a common payment platform based on interoperable standards
To develop cross border payment infrastructures to support the growth of cross border payments
Way Forward• Proposed enactment/amendment of relevant laws• Encourage usage of RTGS and other e-payments to reduce
risks• Manpower development/deployment and training• Promotion of cooperation among stakeholders through the
National Payment Systems Committee• Harmonization initiatives including MAC, COMESA & BIS.• Sensitization of the public and banking industry• Thorough appraisal of payment service providers applications
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What is the next innovation?
Microwave Banking???
Thank youQuestions?