Africa Urged to Follow Kenya’s Example
The recently released Africa Progress Report 2014 divulged that Kenya is now the third biggest economy in Africa, after Nigeria and South Africa. This is largely due to Kenya’s focus on finding innovative ways to improve the financial inclusion of its citizens. This focus has served to develop effective mobile banking and electronic commerce in the country, something that the report states was integral to Kenya’s economic success.
“African governments can also support the development of mobile banking and e-commerce to overcome financial exclusion, building on successes such as M-Pesa in Kenya. Development finance institutions should work with the private sector to foster more balanced perceptions of risk,” said the report, released at the World Economic Forum in Abuja, Nigeria.
By improving financial inclusion, Kenya has at the same time been working on bettering their infrastructure – a key focus, according to the report, for sustainable economic success in Africa.
The Three “I”s
According to Donald Kaberuka, president of the African Development Bank, in order for Africa to achieve sustainable economic growth, there has to be major investment in institutions, integration, and infrastructure.
Most African countries still have greatly underdeveloped infrastructure, despite sporting robust growth in the past decade. This lack of infrastructure curtails potential economic growth, claims the report, as many citizens do not even have access to formal financial options.
“Only one in five Africans have any form of account at a formal financial institution, with the poor, rural dwellers and women facing the greatest disadvantage. Such financial exclusion undermines opportunities for reducing poverty and boosting growth that benefits all,” explains the report.
Kenya the most financially inclusive
Along with the findings in the Africa Progress Report 2014, a recent survey by the Financial Access Partners, released in March this year, also praised Kenya. It found that 77 percent of Kenyan citizens have access to financial service points within a 5km radius of their residence, with 75 percent of those access points being from mobile money agents.
Not only is Kenya’s mobile money infrastructure impressive for Africa, but it is also ranked as the best in the world. M-Pesa, Kenya’s first mobile money banking product, proved the country’s expertise in mobile money transfers and mobile banking services.
M-Pesa’s success can be attributed to many factors, one being the support of the Central Bank of Kenya, the regulatory board needed to champion such innovation over pre-existing regulations. Other African countries enjoy less support on this front, with many of them suffering from strict regulations and inefficiency from the agents needed to implement such projects. This is what the report stresses needs to change, for the economic benefit of those countries. The countries, such as Kenya, with more liberal markets, are able to implement new structures to challenge the old problems, such as financial inclusion of rural citizens.
The report urges other African countries to start following in Kenya’s footsteps towards financial inclusion. It is through this achievement that countries will be able to have more control over their wealth, and grow their economies from the bottom up. The more people with access to formal financial options, the more money being circulated on the market, as well as growing for the investors, rather than being kept under mattresses.
For further reading, go to these sites:
- Joshua Masinde, “Promote mobile banking like Kenya, report urges African states”, Daily Nation, 13 May 2014. Available at: http://www.nation.co.ke/lifestyle/smartcompany/Promote-mobile-banking-like-Kenya-report-urges-African-states-/-/1226/2312716/-/ywgilo/-/index.html
- Mwangi S. Kimenyi and Josephine Kibe, “Africa’s Powerhouse”, Brookings, 6 January 2014. Available at: http://www.brookings.edu/research/opinions/2013/12/30-kenya-economy-kimenyi
- “Kenya’s economy ranked third biggest in Africa”, News24 Kenya, 5 May 2014. Available at: http://m.news24.com/kenya/Business/News/Kenyas-economy-ranked-third-biggest-in-Africa-20140509