How Deep is Kenyan Financial Sector?

14 Apr

Kenya is rated Second in Africa after South Africa in the usage of advanced formal financial services. Financial inclusion has been a success story in Kenya with over 44% percent of Kenyans having accessed Formal/Informal banking services. Barriers to access to Financial Instruments/services has been considerable reduced during CBK Governor Professor Njuguna Ndung’u tenure.

Financial inclusion is the delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society, this in Kenya has been enabled majorly through use of Mpesa and other mobile phone money transfer services which have virtually “included”  over 18 Million  kenyans in the usage of financial products,This being mainly the rural unbankable population that had previously been “excluded” from the financial system by the banks due to cost implication associated.

Drivers of financial inclusion in Kenya, most notably M-PESA and Equity bank, centre on supportive regulation, innovative business models and technological advances. Both formal inclusion (through Banks) and non formal inclusion (through mpesa, chamas and Saccos) account for over 44% of kenyan population, only compatible to South Africa.

How included are we?

  1. Do you own an active bank account
  2. Have you ever taken a loan from a bank/chama
  3. Do you use Mpesa, zap
  4. Do you own a CDS account, trade in shares/bonds

Those are among the questions that can help you know whether you are excluded or included.

Financial deepening refers to the increased provision of financial services with a wider choice of services geared to all levels of society and how available/accessible are Financial Institutions to population, Banks have been opened in the villages in countries like India, china and so on this is the same trend in Kenya with the onset of agency banking in Kenya you will be doing all your banking needs in your village/ estate.  That is just how deep our financial system is.

what are the advantages associated with these? high volatility (the speed at which money changes hands in the society)  the higher the money volatility the higher the amount of money in Circulation, Thus increased Investments and Employment.

Economists have long held the view that the development of the financial system (financial deepening) and economic development are closely intertwined.

Yes under the management of the current CBK Governor, professor Njuguna Ndung’u , Considerable progress has been made in the financial sector in Kenya, but we are not yet there….



Posted by on April 14, 2011 in Banking, Financial, Uncategorized


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