Is Kenya's Digital Revolution Informalising Financial Inclusion?
32 Pages Posted: 21 Feb 2015 Last revised: 26 Sep 2015
Date Written: September 18, 2015
This paper uses FinAccess data to provide an alternative accounting of mobile money’s contribution to formal financial inclusion and explores how this powerful new financial tool enables informal as well as formal financial action. The paper argues that the access strand framework employed in Kenya’s financial inclusion reporting places too much emphasis on a supply-side perspective which concentrates on institutional formality, rather than the underlying behaviours and functions which financial products enable. In the development lexicon, it is the latter which are of interest, rather than the former. Financial sector development initiatives rest on the understanding that financial tools can improve the capacity individuals and institutions to manage liquidity, invest productively, pool risk effectively and transact efficiently, with consequent impacts on livelihoods and growth. For households (and to an extent businesses) these benefits can be delivered through informal as well as formal institutions, with their differing attributes of flexibility, security, cost, value addition and so forth. The increasing trend exhibited by Kenyans towards diverse financial portfolios that encompass formal and informal products, demonstrates the value which many Kenyan’s see in formal institutions as well as institutions that are currently classified as ‘informal’ or even ‘excluded’. If savings, credit, and investment are positive financial actions, and these actions can be enacted in both the formal and informal institutions, then the goal of our analysis is to start a larger dialogue about the impact of mobile money as a tool for stimulating beneficial financial activity, without limiting the conversation to activity in the formal sector.
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