EFINA INNOVATION FORUM: GLOBAL PESPECTIVES ON FINANCIAL INCLUSION November 4, 2010 Lagos, Nigeria Financial Inclusion The Kenyan Case By Stephen Mwaura Nduati Head, National Payments System Central Bank of Kenya
Outline Internet Internet usage in Africa Financial Access in Africa Challenges Mobile 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
Mobile 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 Slower 2% Less convenient 4% Speed Convenience Quicker 98% Less safe 2% More convenient 96% More expensive 4% Safety Safer 98% Cost Cheaper 96% 21
Mobile phone financial services. minsurance mbanking Mobile phone financial services mpayments m.. 22
Types of mobile phone financial services ADDITIVE MOBILE PHONE MODEL TRANSFORMATIONAL MOBILE PHONE MODEL Additive mobile phone model Bank led Added service to existing customers Bank Transformational Non bank led Introduction of new entities Reaches out to the unbanked Mobile Service provider 23
Mobile phone banking (M-Banking) Additive Bank Access to a customers account via the mobile phone Balance Inquiry Fund Transfer Bills Payment TOP-UP / Reload phone Checkbook Request List Accounts Change PIN request 24
Mobile payments/remittances Transformational 25
The Case of Kenya 26
Access To Financial Services - Kenya 2006 2008 Formal - Regulated banks, building societies or Postbank Formal - Regulated banks, building societies or Postbank 38.00% 19.00% 8.00% Formal Other - SACCOs and MFIs Informal - ASCA and ROSCAs 32.70% 22.60% 17.90% Formal Other - SACCOs and MFIs Informal - ASCA and ROSCAs 35.00% Unbanked - No formal or informal financial products used 26.80% Unbanked - No formal or informal financial products used Source - National Survey on Access to Financial Services in Kenya 27
GROWTH IN BANK BRANCHES 100,000 GROWTH IN USAGE 1999-2009 1200 90,000 80,000 70,000 1000 60,000 50,000 40,000 30,000 800 20,000 10,000 0 No of Branches 600 1999 2000 2001 2002 2003 2004 2005 2006 Number of ATM machines 2007 2008 2009 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 1800 1600 1400 1200 1000 800 600 400 200 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Throughput Comparison Across Various Payment Systems In Kenya 900,000 800,000 High value payment system Retail payment systems 868,226 700,000 600,000 499,703 500,000 400,000 300,000 3,422 70,647 200,000 34,709 100,000 0 64,810 RTGS (KEPSS) 7,000 ACH (Cheques) ACH (EFTs) 1,136 ATM 2,852 MOBILE 1,993 V a V o Value (m) Volume
Local Money Transfer After M-pesa Source: FSDK presentation (2009) 30
Why Mobile Money Transfer Only 19% of Kenyans have bank accounts but many more have access to a mobile phone & the gap is widening Addressable Mobile Market Banked Population 19% 30% 70% Mobile Penetration People without Mobile Phones 81% Banked Unbanked 31
M-PESA: Growth Growth of M-Pesa USERS (millions) 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Total Mobile Active* customers as at end of (cumulative) million Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 2007 2008 2009 2010 09/2010: More than 12.7 million registered M-Pesa Users Growth of M-Pesa AGENTS 25,000 20,000 15,000 10,000 5,000 0 Total number of agents (cumulative) Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 2007 2008 2009 2010 09/2010: More than 20,000 M-Pesa Agents 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 Mkesho launched in May 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 (Yu Cash). Many service providers e.g. power and water have integrated their bill enquiries and payments to the mobile phone 34
Enabling Environment
Policy Framework E- commerce Telco regulation AML-CFT EE: MOBILE PAYMENTS & MOBILE BANKING Competition Bank Agency Bank outsourcing 36 Payment systems 36
Enabling Environment: Policy Balance Stability of the financial system Efficiency Financial integrity Consumer protection & choice Broader access 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 Payment Body National Payment Data Payment Legislation Infrastructure & Standards Cross Border Connection The need for cooperation and coordination in the payment market The need for payment system data to support decision and policy making The need for an explicit legislation on payment systems to safeguard financial stability To develop a common payment platform based on interoperabl e standards To develop cross border payment infrastructur es to support the growth of cross border payments 40
Way Forward Proposed enactment/amendment of relevant laws Encourage usage of RTGS and other e-payments to reduce risks Manpower development/deployment and training Promotion of cooperation among stakeholders through the National Payment Systems Committee Harmonization initiatives including MAC, COMESA & BIS. Sensitization of the public and banking industry Thorough appraisal of payment service providers applications 41
What is the next innovation? Microwave Banking???
Thank you Questions?