Financial Inclusion The Kenyan Case By Stephen M waura Nduati - PowerPoint PPT Presentation

EFINA INNOVATION FORUM : GLOBAL PESPECTIVES ON FINANCIAL INCLUSION November 4, 2010 Lagos, Nigeria Financial Inclusion – The Kenyan Case By Stephen M waura Nduati Head, National Payments System Central Bank of Kenya

Outline • Internet • Internet usage in Africa • Financial Access in Africa • Challenges • M obile phone financial services • The Case of Kenya • Enabling Environment • Way Forward 2

Internet

World Internet Penetration Rates 4

Internet Users in the World 5

Internet usage in Africa 6

Internet Points of Presence In Africa

Top 10 Internet Usage in Africa 8

Financial access 9

Financial Access strands in Africa (www.finscope.co.za) 10

Financial access strand Source: Finscope South Africa 11

Payment landscape in Africa • African countries are generally, less developed with high unbanked populations, unemployment rates, illiteracy and poverty 12

Challenges

Poor infrastructure 14

Difficult terrain 15

High adult illiteracy 16

Poverty 17

But Africa has the highest mobile growth rate in the world 18

M obile phone financial services 19

Benefits of the mobile phone • Affordability • Wide reach • Use for utility payments • User friendly • An opportunity to marshal deposits outside the banking system 20

Comparing the mobile phones with alternatives Less Slower convenient 2% 4% Convenience Speed M ore M ore Quicker expensive Less safe convenient 98% 4% 2% 96% Cost Safety Cheaper Safer 96% 98% 21

Mobile phone financial services…. mI nsurance mBanking Mobile phone financial services mPayments m….. 22

Types of mobile phone financial services • ADDITIVE M OBILE PHONE Additive mobile phone model – Bank led – Added service to existing customers M ODEL Bank • Transformational • Non bank led M OBILE PHONE M ODEL • Introduction of new entities TRANSFORM ATIONAL • Reaches out to the unbanked M obile Service provider 23

M obile phone banking (M -Banking) Additive Bank • Balance Inquiry • Fund Transfer Access to a customers account via the mobile phone • Bills Payment • TOP-UP / Reload phone • Checkbook Request • List Accounts • Change PIN request 24

M obile payments/ remittances Transformational 25

The Case of Kenya 26

Access To Financial Services - Kenya 2006 2008 Formal - Regulated Formal - Regulated banks, building banks, building societies or societies or Postbank Postbank Formal Other - Formal Other - SACCOs and MFIs SACCOs and MFIs 19.00% 22.60% 32.70% 38.00% 8.00% Informal - ASCA Informal - ASCA and ROSCAs and ROSCAs 17.90% 35.00% Unbanked - No 26.80% Unbanked - No formal or informal formal or informal financial products financial products used used Source - National Survey on Access to Financial Services in Kenya 27

GROWTH IN USAGE 1999 -2009 GROWTH IN BANK BRANCHES 100,000 1200 90,000 80,000 70,000 60,000 1000 50,000 40,000 30,000 20,000 800 10,000 0 No of Branches 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 600 Number of ATM machines 2000 400 1800 1600 1400 1200 200 1000 800 600 400 0 200 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Throughput Comparison Across Various Payment Systems In Kenya Retail payment systems High value 868,226 900,000 payment system 800,000 700,000 600,000 499,703 500,000 400,000 3,422 300,000 70,647 200,000 34,709 100,000 64,810 7,000 0 1,136 V 2,852 o 1,993 RTGS (KEPSS) V ACH (Cheques) a ACH (EFTs) ATM M OBILE Value (m) Volume

Local M oney Transfer After M -pesa Source: FSDK presentation (2009) 30

Why M obile M oney Transfer Only 19% of Kenyans have bank accounts but many more have access to a mobile phone & the gap is widening Addressable M obile M arket Banked Population 19% 30% M obile Penetration Banked 70% 81% People without M obile Unbanked Phones 31

M -PESA: Growth Total M obile Active* customers as at end of (cumulative) million Growth of 09/2010: 14.00 M-Pesa More than 12.00 10.00 USERS 12.7 million 8.00 6.00 (millions) registered 4.00 2.00 M-Pesa 0.00 Users M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep 2007 2008 2009 2010 Total number of agents (cumulative) Growth 09/2010: 25,000 of 20,000 More than 15,000 M-Pesa 20,000 10,000 AGENTS M-Pesa 5,000 0 Agents M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep Nov Jan M ar M ay Jul Sep 2007 2008 2009 2010 32

The potential for mobile phones – The case of Kenya • 19 million own mobile phones in Kenya as at 2009 • Financial sector serves 23% of the bankable population • Deployment of mobile money transfer services (M - Pesa) in 2007 led to 27.9 % of bankable population accessing money transfer services by 2009 and perhaps better by 2010. • Has increased deposit accounts from 2.55million in 2005 to 12million in 2010. Transferred Ksh 68.02 billion equivalent to US$ 841 million with 28.45 million transactions 33

• M -Pesa remains a low value payment system: targets the bottom population • M kesho launched in M ay 2010 has enrolled over 700,000 with over USD5 million mobilised. • Other banking products that leverage on mobile phone technology include KCB Bank Connect and Family Bank’s Pesa Pap. • Other mobile phone operators have also launched their mobile money products – Zain (Zap) and Essar (Y u Cash). • M any service providers e.g. power and water have integrated their bill enquiries and payments to the mobile phone 34

Enabling Environment

Policy Framework Telco E- commerce regulation AML-CFT Comp- EE: MOBILE etition PAYMENTS & MOBILE BANKING Bank Agency Payment systems Bank outsourcing 36 36

Enabling Environment: Policy Balance Stability of the financial Efficiency system Financial integrity Broader access Consumer protection & choice 37

What is the role of the private sector? What is the role of the Government? What is the role of the central bank? 38

Possible roles for policy makers • Regulator • Supervisor • Standard setter • Information gatherer • Facilitator • Coordinator 39

Strategic Approach Innovative Payment Systems Strategic Approach Industry National Cross Payment Infrastructure Payment Payment Border Legislation & Standards Body Data Connection The need for The need for The need for To develop a To develop cooperation payment an explicit common cross border and system data legislation payment payment coordination to support on payment platform infrastructur in the decision and systems to based on es to support payment policy safeguard interoperabl the growth of market making financial e standards cross border stability payments 40

Way Forward • Proposed enactment/amendment of relevant laws • Encourage usage of RTGS and other e-payments to reduce risks • M anpower development/ deployment and training • Promotion of cooperation among stakeholders through the National Payment Systems Committee • Harmonization initiatives including M AC, COM ESA & BIS. • Sensitization of the public and banking industry • Thorough appraisal of payment service providers applications 41

What is the next innovation? M icrowave Banking ???

Thank you Questions?