in the 21st Century

2 Kenya’s Financial Transformation in the 21st Century
will be to design products that play a serious welfare-improving role in the
financial management practices of low- and middle-income households.
Digital technology has breached the access frontier, enabling more intensive
engagements between providers and consumers of finance. Will this create a
win-win situation where value is created for all parties? Or will it lead to more
opportunities for extraction by corporations at the expense of the poor? What
factors are likely to sway the balance between these possibilities?
The aim of this book is to stimulate debate on how we analyse and think
about the future of market development and its implications for poverty and
growth. The book was commissioned by Financial Sector Deepening (FSD)
Kenya as an invitation to scholars to dig more deeply into the data that have
been collected over the past ten years by FSD and its partners, especially the
Central Bank of Kenya (CBK). While a wealth of data exists on Kenya’s
financial markets, our understanding of market drivers and their development
impacts is still limited. Drawing on cutting-edge methodology and sophisticated
analysis, the purpose of this book is to take a step back from the narrative
of progress that has characterised financial inclusion reports. The chapters
take a more critical look at the financial landscape, highlighting constraints to
infrastructural expansion, effects of market structure, demand-side drivers of
uptake and usage, as well as the implications of financial sector development
for poverty and growth. The seven chapters can be grouped into three broad
areas. The first three chapters look at the achievements and constraints to
formal access, leveraging demand and supply-side data. The middle chapters
look at the effects of digitisation on financial inclusion, while the final chapters
propose new measures of financial inclusion.
The book draws principally on time-series data produced by three successive
rounds of the Kenya FinAccess household surveys (CBK and FSD Kenya, 2007
2009, 2013). The FinAccess surveys, following the South African FinScope
model, were instituted to track and better understand progress towards financial
inclusion from a policy perspective, as well as providing valuable market data
for industry, including market sizing and segmentation. The chapters also draw
on supply-side analysis from geo-spatial mapping of financial outlets (Bill and
Melinda Gates Foundation, CBK and FSD Kenya, 2014, 2015) and financial
institution annual returns, as well as referencing qualitative studies such as
FSD’s Kenya Financial Diaries (Zollmann, 2014), which provide invaluable
insights into financial usage and behaviour. Ultimately, the book is testimony
to the importance not only of data but also of the analytical frameworks we
use in its interpretation, and how this affects the way we understand and
shape markets.