Seventeen percent of Kenyans are excluded from access to formal financial services meaning they don’t have any savings, cannot pay for services, and cannot take loans from lending institutions hindering their ability to contribute to economic growth, The Kenya Economic Report 2020 shows.
The report authored by the Kenya Institute of Public Policy and Research (KIPPRA), a think tank shows that overall, national access to financial inclusion stands at 82.9%, an improvement from 26.7% over the past decade.
Access to financial products and services, including savings, payment for services, and loans, has the potential to contribute to inclusive growth hence the identification of financial inclusion as a key plank in the Kenya Vision 2030 by the authors of the Action Plan.
KIPPRA’s report states disaggregation of data by counties shows that counties with the most access to finances, either credit, savings or insurance, are mainly counties with big urban areas
Further disaggregation of data by gender shows a gender disparity between males (85.6%) and females (80.3%).
The situation is even more dire for the youth with a significant proportion of them (23.5% male) and (25.4% female) do not have formal financial access especially in insurance and credit aspects.
Deepening financial inclusion among the population for inclusive growth requires continued expansion of agent-based banking and other cost-effective delivery channels to reach the financially excluded.
“Also, there is a need to promote financial literacy to allow individuals to know their financial circumstances; and streamline the operations of the Uwezo Fund, Youth Enterprise Development Fund, and the Women Enterprise Fund to ensure the challenges facing these funds are adequately addressed,” reads the report.
Straining Poor Kenyans
The report also shows that Kenya has made significant progress in poverty reduction in the last two decades, with poverty rate dropping from 52.3% in 1997/98 to 46.8% in 2005/06 and eventually to 36.1% in 2015/16.
However, the rate of decline is, however, not commensurate with the growth in Gross Domestic Product (GDP), and income and consumption inequalities persist.
Poverty levels are higher in rural areas, among the elderly and the youth.
“Employment growth has lagged GDP growth and while agriculture is the main employer, the sector faces low and declining productivity, which has implications on the welfare of those employed in the sector. Food constitutes the highest expenditure among the poor and, therefore, food-related inflationary pressures tend to push some of the poor to below the poverty line,” reads the report.
While pro-poor expenditures have increased, the rising debt servicing costs threaten their sustainability.The Kenya Economic Report 2020