Mobile cash firms beat banks in service access

World Bank Consultant on Development Research Dorothe Singer (left) and Senior Financial Sector Specialist Mehnaz Safavian during launch of the Global Findex database at the Serena Hotel in Nairobi on June 9, 2015. The report explores how digitising payments, government transfers, and remittances can contribute to financial inclusion, broad-based economic growth and women empowerment. PHOTO | SALATON NJAU |

What you need to know:

  • How digitisation can help boost life quality.
  • Report says most of those in need of products turn to their handsets as opposed to operating accounts.

Mobile money service providers have outpaced banks in enabling Kenyans to access financial services.

According to the 2014 Global Findex report released on Tuesday by the World Bank, 19 per cent of Kenyan adults are said to only operate mobile money accounts compared to only 16 per cent who deal with banks.

Development Research Group Consultant Dorothe Singer who co-authored the report, said mobile money accounts appeal to the unbanked by providing more convenient and affordable financial services.

“In 2014, the breakdown of the overall account ownership which stood at 75 per cent included 16 per cent of adults in Kenya who reported having a financial institution account only, 39 per cent a financial institution and mobile money account, and 19 per cent only a mobile money account,” Ms Singer said.

The growth signifies a narrowing space for banks and other traditional financial service providers as majority of the unbanked show higher likelihood to open mobile service accounts.

Banks will even face stiffer competition as services such as interest earnings from savings and access to credit that traditionally attracted accounts opening are now being provided by mobile money service providers.

In March, mobile banking service M-Shwari had reportedly signed 10 million accounts and extended unsecured loans totalling Sh29 billion, processing an average of 50,000 loans per day.

HUGE POTENTIAL

The report further says that out of those who own accounts in banks, only 30 per cent are reported to be using them for savings.

Kenya is said to have a huge potential to scale up financial inclusion in which it ranks far above Nigeria’s (45 per cent), South Africa’s (71 per cent) and the 54 percent financial inclusion in the developing economies.

The report also puts Kenya, South Africa, and Uganda among the top three countries with the highest shares for both sending and receiving domestic remittances as between 65 and 70 per cent of adults reported having sent or received them.