Mobile banking

Mobile banking continues to reach out to Kenya’s micro enterprises

Reveals on the evolution of Kenya’s financial sector are always exciting. It was no different with the release of Kenya FinTech Report 2017, by Nest, on 20th January. The report highlights the dynamism of FinTech in the country.

There is acknowledgement of how mobile money has led to greater inclusion of Kenyans into formal financing. But of more interest to us is how something that was first sold, to the public, as mobile payment is now encroaching into commercial bank territory. Mobile money in Kenya has connected more people to financial services in the last 10 years than banks in the last 100 years.

The greatest winners in this have been micro and small enterprises. These fields are dominated by women. Commercial banks never accorded them the respect they felt they deserved. Banks did not really bother to understand the environment in which they operate .

Consequently,  banks charged them more to access capital. This atmosphere of poor relations and services allowed disruption of finance sector to set in.

This was in the form of mobile banking. It is a blot that commercial banks ended up adopting such an important innovation, in their sector, rather than pioneering it. Allowing people to open accounts for free still seems to be their most creative move. I’m not hating. Kenya FinTech Report 2017 reveals that there was $8 billion (sh.832 billion) in transactions for, the Telco, Safaricom. The bank which opened banking to every Kenyan  led its counterparts with $1.3 billion (sh.135.2 billion) in transactions.

As banks now seek out micro-entrepreneurs through collaborations with Telcos, even more alternatives are availing themselves. M-Shwari has to get its mention but it is now small startups that are leading the way in FinTech products. All this is being done through mobile phones.

These businesses are employing sophisticated data analysis tools to determine how and to whom to lend money. The loans may not amount to much in comparison to what banks can give but they are of great importance.

Women running micro and small enterprises are not quite able to reinvest back in business as they generate little income. They have to spend most of their profit in sustaining themselves and their families. But with access to financing, each woman who gets a loan can be in control of much more capital even with the same small profits. This can be used to boost business and realize better living standards.