Financial Inclusion The Kenyan Case By Stephen M waura Nduati - - PowerPoint PPT Presentation

Financial Inclusion – The Kenyan Case

By

Stephen M waura Nduati Head, National Payments System Central Bank of Kenya

EFINA INNOVATION FORUM : GLOBAL PESPECTIVES ON FINANCIAL INCLUSION November 4, 2010 Lagos, Nigeria

Outline

• Internet
• Internet usage in Africa
• Financial Access in Africa
• Challenges
• M obile 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

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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

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Poverty

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But Africa has the highest mobile growth rate in the world

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M obile 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

Quicker 98% Slower 2% M ore convenient 96% Less convenient 4% Safer 98% Less safe 2% Cheaper 96% M ore expensive 4%

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Speed Convenience Safety Cost

Mobile phone financial services….

Mobile phone financial services mBanking mPayments m….. mI nsurance

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Types of mobile phone financial services

ADDITIVE M OBILE PHONE M ODEL

• 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 M obile Service provider

TRANSFORM ATIONAL

M OBILE PHONE M ODEL

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M obile 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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M obile payments/ remittances

Transformational

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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

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GROWTH IN USAGE 1999 -2009

200 400 600 800 1000 1200 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 No of Branches

GROWTH IN BANK BRANCHES

200 400 600 800 1000 1200 1400 1600 1800 2000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Number of ATM machines

V a V

• 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 M OBILE

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 M oney Transfer After M -pesa

Source: FSDK presentation (2009)

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Why M obile M oney Transfer

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70% 30%

Addressable M obile M arket

M obile Penetration People without M obile 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-Pesa USERS (millions) Growth

• f

M-Pesa AGENTS 09/2010: More than 12.7 million registered M-Pesa Users 09/2010: More than 20,000 M-Pesa Agents

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0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep 2007 2008 2009 2010

Total M obile Active* customers as at end of (cumulative) million

5,000 10,000 15,000 20,000 25,000 M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay 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

• M kesho launched in M ay 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 (Y u Cash).

• M any 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 systems Bank

• utsourcing

Comp- etition Telco regulation EE: MOBILE PAYMENTS & MOBILE BANKING

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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

• n payment

systems to safeguard financial stability To develop a common payment platform based on interoperabl e standards To develop cross border payment infrastructur es 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

• M anpower development/ deployment and training
• Promotion of cooperation among stakeholders through the

National Payment Systems Committee

• Harmonization initiatives including M AC, COM ESA & BIS.
• Sensitization of the public and banking industry
• Thorough appraisal of payment service providers applications

41

What is the next innovation?

M icrowave Banking ???

Thank you Questions?