A SWIFT Institute report, which specifically looks at Kenya as a use case — as well as sub-Saharan Africa — shows that mobile banking has aided Kenya’s financial rates drastically. But that research also indicates that the same case may not be true for other similar developing countries.
“With this research, we aimed to understand the real impact of technological and business model innovations on levels of financial inclusion and poverty reduction. The research analyzes the impact of mobile banking because this technology holds the greatest promise in overcoming geographic, demographic and institutional constraints to financial inclusion,” said Dr. Jay Rosengard, director of the Mossavar-Rahmani Center for Business and Government’s Financial Sector Program at Harvard Kennedy School.
What the study shows is that mobile banking has been the key factor in bringing Kenya’s population into the mainstream financial fold. For example, in 2014, 58.4 percent of all adults had a mobile account. Of that, roughly 90 percent of all senders and recipients of domestic remittances used a mobile phone.
Moreover, once mobile banking became prevalent in the region, financial inclusion rates have seen a rapid transformation. In fact, from 2006 to 2015, adults using formal financial services tripled. Those figures rose from 26.7 percent to 75.3 percent in that time. Most importantly, adults completely excluded from the financial fold dropped from 41.3 percent to 17.4 percent.
A major change in the region came with Safaricom’s M-PESA. But M-PESA, the report stated, had success because of Kenya’s political and economic attitude, which was ripe for change. Essentially, the lack of affordable consumer choice paved the way for new solutions to create a new market. But this may not be the case everywhere.
“Since no two countries are exactly the same, it would be ill-advised to suggest that Kenya’s strategy for increasing financial inclusion simply can be transplanted to another country,” Rosengard said. “M-PESA’s success in Tanzania and failure in South Africa are vivid demonstrations of these replication principles. However, where Kenya’s success factors might be present, albeit perhaps in a different form, many of Kenya’s lessons can be adapted. Where conditions are significantly different, the challenge will become how best to nurture homegrown innovative solutions to address specific local constraints.”