in the 21st Century

Formal Financial Inclusion in Kenya: Understanding the Demand-Side Constraints 123
variables, a 1% increase in income results in an 8.5% increase in the likelihood
of a person being banked. This result is slightly higher than the finding of Beck
(2011) using the 2009 FinAccess data, where a 1% increase in expenditure
led to a 7% increase in the likelihood of a person being banked. 13 This result
is in line with what our conceptual framework would suggest. From a policy
perspective, this tells us that this increase in income is changing the demand
of those involuntary excluded and increasing their access to formal bank
products. Again, however, it is important to remember that changing the value
proposition of bank products for different income groups is also critical to the
uptake of these products. Focusing solely on income without tailoring these
bank products to better fit the needs of lower income individuals misses an
important opportunity to increase access.
Figure 8: Formal bank access by income quintile and financial numeracy, 2013
100
Percent formally banked
80
60
40
20
0
5%
11%
17%
Lowest income
quintile
Source: FinAccess 2013 data.
7%
17%
24%
Second income
quintile
16%
23%
40%
Third income
quintile
1%6
38%
46%
Fourth income
quintile
32%
59%
80%
Highest income
quintile
No financial numeracy Some financial numeracy Financial numeracy
In Figure 9 we plot the predicted values of being formally banked from
Regression 3 (Demographic Factors) in Table A1 in the Appendix against
the actual log incomes of survey respondents from the FinAccess 2013 data,
giving us a visual representation of the relationship. This shows us that there
is a positive relationship between income and being formally banked – as
income increases, especially at the higher end of income levels, an individual
has a higher probability of being formally banked. 14
13 Expenditure versus income data is used for the 2009 analysis.
14 Figure 9 also suggests that the relationship between income and being formally banked is not necessarily linear,
therefore our approach of using log income is the right one.