09 Apr 2019

The 2019 FinAccess household survey is the fifth in a series of surveys that measure drivers and usage of financial services in Kenya. The 2019 report was officially launched on April 3rd 2019. The four previous surveys of 200620092013 and 2016 have shown that Kenya has made significant progress in fostering financial inclusion, with the latest survey providing a thirteen year perspective on Kenya’s financial landscape.

Formal financial inclusion has risen to 82.9 percent, up from 26.7 percent in 2006, while complete exclusion has narrowed to 11.0 percent from 41.3 percent in 2006. The disparities in financial access between rich and poor, men and women, and rural and urban areas have also declined remarkably. Key drivers of these changes include: the growth of mobile money, government initiatives and support, and developments in information and communications technology (ICT).

Originally posted on FSD Kenya’s site


Alex Taylor, Wayne Hennessy-Barrett
17 Jan 2019

By Alex Taylor, Wayne Hennessy-Barrett

This post, the first of two on pilot assessments for digital credit standards, features a Q & A with 4G Capital CEO Wayne Hennessy-Barrett.

Digital lending has the potential to close the credit demand gap for unbanked, low-income customers, but the rapid growth of the sector has raised consumer protection concerns.

In Kenya alone, a leading testing ground for the digital credit sector, there are more than 50 providers and an estimated one in four Kenyans have taken a digital loan. With mobile phone ownership saturating developing markets, we can anticipate similar acceleration in the digital lending space globally.

Recent findings have generated debate over whether or not these new products are translating into real benefits for base of the pyramid consumers. Demand is rising from investors, regulators, and providers for ways to demonstrate responsible practices in digital lending.

To fill the gap, the Smart Campaign has undertaken research to better understand risks and benchmarks for responsible digital financials services. In partnership with MFR, we’re working with providers to conduct field assessments that identify best practices and help us to determine where to set the bar for responsible behavior. These field assessments, industry research, and engagement with DFS providers in Smart’s Fintech Protects Community of Practice will lead to standards for responsible digital credit that are sustainable for the industry while keeping client needs as the central focus.

4G Capital, a digital MSME lender in East Africa and a member of Fintech Protects, recently partnered with the Smart Campaign to conduct a field assessment. We asked 4G Capital CEO Wayne Hennessy-Barrett for his take on responsible digital lending and the value of industry standards for consumer protection.

Q: Tell us about the origins of 4G Capital and its products.

WHB: We began operations in Kenya in 2013, starting with microloans for enterprises using only mobile money. As our relationship with our customers grew, we began informal coaching and mentoring of clients to improve their performance. This evolved quite quickly into a program of enterprise-skills trainings packaged with each loan. We now have a number of different working-capital credit products which are the right size and timed according to the specific needs of the business user, and we’re also scaling with partners to reach tens of thousands of new clients each month.

Q: What was your motivation for joining Fintech Protects and inviting the Smart Campaign to work with 4G in a field assessment of responsible practices?

WHB: We have always been a mission-driven business. As a fintech lender, Fintech Protects was the perfect forum to share our experiences and learn from others to find ways to close the finance gap, which leaves so many businesses and families excluded.

The field assessment was a rigorous, end-to-end audit of whether we were able to ‘walk the talk.’ It is nearly impossible to self-assess with the right level of accuracy. Either you’re too hard on yourself, or you get distracted by successes and don’t zero in on the things that need to be fixed.

Q: What did the field assessment confirm about your business? What surprised you?

WHB: I was delighted, but not surprised, by the level of professionalism and rigor exercised by Smart and MFR. It was encouraging to get positive feedback on the positive customer outcomes we continue to see consistently – that really is the most important thing that we need to reinforce and protect.

Q: How do you think about scale and growth of your business in the context of a blended high-touch/high-tech model?

WHB: Accounting for inflation, forex risk and future value of money, this is the $64 Billion Question!

We need to scale to reach more excluded people, catalyze more value chain growth, and, of course, grow our own business. Our transformation program (which is a continuously evolving cycle) sees our AI and technology developing to continue to improve predictive underwriting to further deliver value to our clients as part of supporting their overall financial health. This should free our people to really focus and excel at what they’re good at: relationships, customer care, and contributing their own experience and knowledge to help us evolve with our clients’ needs.

Q: Of all the areas that the Client Protection Principles cover, what do you think will be the single most important issue digital lenders must contend with over the next five years?

WHB: It has to be data protection. There are a ton of fintech lenders who are trying to do good things at the moment, but where data can sometimes be gathered in a way clients, if fully aware, would find really intrusive. We need to reset the conversation about data and the way businesses conduct themselves so that even the most remote and excluded have digital self-sovereignty and power over their own data.

Q: How do the client protection standards provide value to you as a business?

WHB: Happy clients = happy business. It really is that simple.

This was originally posted on CFI’s website


23 Aug 2018

Digital Credit is growing rapidly and is democratizing credit with instant, automated, and remote processes, meeting short-term liquidity needs of low- and middle-income populations. Digital credit, at the onset, has demonstrated financial outreach – offered even to credit invisible customers, who do not have an account ownership or a credit history.

This presentation focuses on the digital credit landscape in Kenya.

Digital Financial Services: Challenges and Opportunities for Emerging Market Banks

25 Sep 2017

The digital transformation that has upended industries from retail and media to transport and business-to-business commerce is now sweeping the financial services industry, through the wide dissemination of digital financial services. This was inevitable, as ubiquitous computing power, pervasive connectivity, mass data storage, and advanced analytical tools can easily and efficiently be applied to financial services. After all, money was already extensively (though not exclusively) created, used, stored, processed, and delivered electronically.

Immediacy and personalization have become the norm for consumer goods and services. Consumers have rapidly become accustomed to making purchases with a touch of their finger wherever they may be, receiving tailored recommendations, choosing customized products, and enjoying delivery of almost any item directly to their front door. Businesses failing to adapt quickly to these technological developments can fail dramatically, and many have already done so, including Tower Records, Borders Books, Blockbuster Video, and countless travel agents and brick-and-mortar retailers. Consumers’ new
expectations apply to digital financial services as well.

Technology has transformed business-to-business and within business interactions, too, enabling reconfiguration of design, production, marketing, delivery, and service functions through distributed supply chains, freelance design, outsourced manufacturing, and contract warehousing and delivery. These reconfigurations are mediated by online marketplaces and distributors, and assisted by back-end support operations and data analysis that together drive better risk assessment, faster fulfillment and more efficient customer service.

The same types of disruptive market innovations and reconstituted value chains are now emerging in the form of digital financial services. This poses distinct challenges for incumbent providers such as banks, finance companies, microfinance institutions, and insurance companies, as financial technology—or FinTech—innovators enter their markets. Incumbents, too, can benefit from these developments, which will enable them to broaden financial access, introduce new products and services, and serve customers more efficiently by deploying new technologies internally or in partnership with external innovators.

Fraud in Mobile Financial Services: Protecting Consumers, Providers, and the System

09 Sep 2017

This Brief highlights how fraud is impacting mobile money providers, agents, and consumers, as well as efforts to reduce risks and vulnerabilities to fraud in mobile money and related services. While it is not possible to remove fraud entirely from any service—mobile money included—the examples addressed here show that fraud is a major issue in several key markets for consumers and agents, and that there are simple steps providers can take to reduce their vulnerability to common fraud types.

These steps include improving internal controls, building agent capacity to protect themselves and their customers, and revisiting procedures such as account access and SIM swaps, where necessary, to prevent common fraud schemes. With the introduction of new products and delivery channels, the types of fraud will continue to evolve, which means that monitoring mechanisms, such as compliance checks and customer feedback channels, will continue to be key elements to effective fraud and risk mitigation.

Building a Secure and Inclusive Global Financial Ecosystem

08 Sep 2017

The 2017 Brookings Financial and Digital Inclusion Project (FDIP) report evaluates access to and usage of affordable financial services by underserved people across 26 geographically, politically, and economically diverse countries. The report assesses these countries’ financial inclusion ecosystems based on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of selected traditional and digital financial services.  The report further examines key developments in the global financial inclusion landscape, highlights selected financial inclusion initiatives within the 26 FDIP countries over the previous year, and provides targeted recommendations aimed at advancing financial inclusion.

Improving Client Value from Microinsurance: Insights from Kenya, India and The Philippines

18 Jun 2015

The primary goal of the International Labour Organization (ILO) is to contribute with member States to achieve full and productive employment and decent work for all. The Decent Work Agenda comprises four interrelated areas: respect for fundamental worker’s rights and international labour standards, employment promotion, social protection and social dialogue. Broadening the employment and social protection opportunities of poor people through financial markets is an urgent undertaking.

Housed at the ILO’s Social Finance Programme, the Microinsurance Innovation Facility seeks to increase the availability of quality insurance for the developing world’s low-income families to help them guard against risk and overcome poverty. The Facility, launched in 2008 with the support of a grant from the Bill & Melinda Gates Foundation, supports the Global Employment Agenda implemented by the ILO’s Employment Sector.

Research on microinsurance is still at an embryonic stage, with many questions to be asked and options to be tried before solutions on how to protect significant numbers of the world’s poor against risk begin to emerge. The Microinsurance Innovation Facility’s research programme provides an opportunity to explore the potential and challenges of microinsurance.

The Facility’s Microinsurance Papers series aims to document and disseminate key learnings from our partners’ research activities. More knowledge is definitely needed to tackle key challenges and foster innovation in microinsurance. The Microinsurance Papers cover wide range of topics on demand, supply and impact of microinsurance that are relevant for both practitioners and policymakers. The views expressed are the responsibility of the author(s) and do not necessarily represent those of the ILO.

Quality Of Delivery Study: FSD Kenya

08 Jun 2015

Financial Sector Deepening Kenya (FSD Kenya) has worked since 2008 with CARE and, since August 2012, with CRS, to develop, test and perfect different models or channels for forming, training and supporting Savings Groups (SGs). In 2013, FSD Kenya commissioned the Quality of Delivery Study (QDS) which had four objectives:

  • Measure the outreach of SGs, both breadth – how many people are members of SGs, and depth – to what extent SGs are reaching the principal target population of poor and otherwise excluded people. ƒ
  • Determine the usefulness or valued added by SGs, and the extent to which the services they offer meet the wants and needs of members. ƒ
  • Answer questions about SGs and consumer protection: are SGs a safe and transparent place to save, or are they putting members at risk of losing their savings or being exploited in other ways?
  • Determine the relative outreach, value-added, and consumer-protection performance of the various delivery channels to help FSD Kenya tailor its investments to produce the best outcomes in terms of efficiency, sustainability and consumer protection.

In short, the QDS was designed to compare the SGs formed by the two international non-governmental organisations (INGOs) with each other, and with the many spontaneous or community-formed SGs.

How M-Shwari Works: The Story So Far

15 Apr 2015

M-Shwari represents the next frontier of digital financial services as it demonstrates that mobile money infrastructure can be leveraged to offer higher value financial products at scale.
“Shwari” means calm in Kiswahili, yet M-Shwari, a bank account offering a combination of savings and loans, has taken the Kenyan market by storm. Offered as a collaboration between the Commercial Bank of Africa (CBA) and mobile network operator (MNO) Safaricom through its ubiquitous mobile money service M-PESA, M-Shwari has piqued the interest of mobile money watchers looking for the next innovation to drive financial inclusion globally. M-PESA is rightly lauded as a global success story: It is used by two-thirds of Kenyan adults, has more than 80,000 agents, and processes nearly $20 million in daily payment transactions. Yet M-Shwari represents the next frontier of digital financial services as it demonstrates that mobile money infrastructure can be leveraged to offer higher value financial products at scale. M-Shwari has already brought millions of poor, previously unbanked Kenyans the full benefits of a banking product (including interest, deposit insurance, and access to credit) using M-PESA’s unparalleled mobile money infrastructure. M-Shwari is also the first large-scale product that taps into digital information (in this case, telecommunication data) of poor and unbanked customers in an emerging market to make credit-scoring decisions.

At the heart of this success is a product that emulates the way low-income Kenyans manage their money. Kenyans constantly balance the need for short-term liquidity with providing a return for the future. The M-Shwari product allows customers to save for the short term while also increasing access to credit options in the future, which makes customers feel that their funds are “working” for them. In addition, the product is easy to figure out and highly engaging as it rewards customers for “good” behavior quickly. The fast, virtual nature of the product does exacerbate the usual challenges of customer education and disclosure but represents an unprecedented new channel of access to short-term loans and secure savings for a swathe of the population who has not had previous access to formal financial services.

Beyond Codes: The Foundation for Client Protection in Microfinance

02 May 2014

Beyond Codes was an action research project of the Center for Financial Inclusion at ACCION. The project was designed to provide a body of experience and knowledge from leading financial institutions serving low-income people about how consumer protection codes of conduct are implemented. The two-year project started in mid-2008 and ended in June 2010. The project aimed to develop the tools and experience that could inform the subsequent work in client protection by grounding it in practices of financial institutions.

Twelve financial institutions (FIs) participated in the project. FIs were of various ages, from less than three to more than ten years. The institutions included banks, non-deposit finance companies, NGOs, and credit unions. Some were large operations with close to one million clients, while others were medium-sized and even small, with fewer than 10,000 customers. The countries represented in the research were: Bosnia, India, Kenya, Mexico, and the Philippines. All the FIs engaged in lending including a range of loan products using various methodologies. More than half also offered savings, transaction accounts, and insurance.