Applause: in BOP banking and payments, Kenya sets a standard

“The example set by Kenya’s banks when it comes to not only reaching the unbanked, but also making a profit from them, is something that the rest of the world should look to emulate.
Banks in large swathes of Africa, Asia and Latin America have undergone huge expansion in the past decade. Many now rank among the world’s biggest. However, this rise, chiefly a result of booming economic growth, has done little to reduce the large numbers of unbanked people in many emerging market countries.
Sub-Saharan Africa is a case in point. Even in some of its most mature economies – such as Ghana, Nigeria and Senegal – no more than one-fifth of the population has bank accounts. Lenders have grown by focusing on the corporate sector and middle-class consumers, not the masses.
But Kenya’s banks are different. Since 2003, when just 3 million of the country’s 40-odd million people were banked, they have greatly expanded their reach among the mass population. Today, almost 15 million Kenyans have bank accounts and there is a widespread belief that it will only be a few years before at least half of them do.”

PAUL WALLACE The Banker (February 1, 2012)

Kenya is not often lauded out there for setting the pace – except on the running track. So it was with startled joy that I came across a piece from The Banker recording our achievements in banking – and suggesting that Kenya has something to teach the world.

The excerpt shown gives you the flavour: Kenya has done something that the rest of the world should emulate. Specifically, we have looked away from a narrow focus on middle-class and corporate customers, and brought large swathes of the unbanked population into the net.

How was it done? Few would doubt today that we had a standard-bearer in attacking the bottom of the pyramid: Equity Bank. That organization steadfastly swam against the conventional wisdom of some years ago, demonstrating that banks can make money from the poorest segments of the population. That took an unusual combination of conviction and courage.

Today, most of Kenya’s big banks have been galvanized into action and followed suit. This has been good for the economy, for we have more people involved in the formal financial sector than ever before. Of course, this is not news to us in Kenya; anyone observing these developments from within would not doubt the scale of the achievement. But it is always nice to see the rest of the world sit up and take notice.

We also made another bold and unprecedented foray right here in Kenya: the leap into mobile payments, and subsequently, into mass mobile banking. For that, we can thank Safaricom, whose remarkable boldness in launching M-Pesa put Kenya on the global map and taught the world another lesson: that something as simple as a text message on a basic phone can drive a complex payments system.

The innovations have not ended there. Kenyan banks are now setting a scorching pace in agency banking, allowing ordinary folks to transact from all sorts of outlets. This reduced reliance on branches has in turn driven profitability: Kenyan banks are amongst Africa’s most profitable.

Much applause, then, for Kenya’s burgeoning finance sector and those who had the vision to drive it. Let us hope we can see a similar level of intrepid innovation and determined execution from other parts of the financial sector: insurers, stockbrokers and investment groups.

And let us also protect the gains: keeping a tight eye on regulation, whilst nourishing the spirit of experimentation that drove these achievements.

In the meantime, we can bask in the fact that Kenya and Kenyans can set a standard for the world, in financial circles as well as athletic ones.

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