Table-banking bridges the financial inclusion gap in Kenya


Whichever way you look at it, Kenya and by extension the East African region is undergoing a major transformation as far as financial inclusion goes. In October last year, the Central Bank of Kenya released a report on development regarding the access and consumption of financial services in Kenya. The FinAccess 2013 Survey revealed that Kenya's financial inclusion landscape has undergone considerable transformation.

Among the key highlights of the report is that the proportion of the adult population using various forms of formal financial services has risen steadily to 66.7 percent in 2013 from 41.3 percent in 2009.

From the above report, it shows that the recent reform efforts and innovations in the financial services sector is bearing ripe fruits with more customers, especially the under-served and the “unbankable” segments, now being seriously considered.

This means that financial institutions have to increasingly diversify their products portfolio with specific characteristics to attract a certain market segment including women, youth and children.

In Kenya, commercial banks dominate the financial services system with a majority of 43 banks licensed in the country situated in major cities and urban areas.

Even though women constitute 50.3 per cent of Kenyans according to the 2009 Kenya Population and Housing Census, majority of them are still locked out of the mainstream banking framework, by either choice or fate, due to the deep rooted socio-economic and cultural factors that for many decades have worked to their disadvantage.

The Constitution of Kenya 2010 gives women a right to own and inherit land which has given them the confidence to engage banks more openly.  

Similarly, a new form of banking known as “Table-Banking” is quickly taking shape. This is a group-funding strategy where about 10 members pool their resources together; meet at least once every month, give their contributions which are loaned to members at “friendly” interest rates as well as make strategic plans on how to invest their savings to earn bonuses.  

It is an interesting twist on micro-finance which builds on a long standing practice in Kenya called the "merry-go-round." These groups are fast revolutionizing the small loans' market with quick gains being registered among the rural women folks who have embraced it.

Due to easy access to funds by members, various income-generating projects including hand-craft activities, bee keeping, chicken and dairy keeping have been created.

This is why KCB has been keen to support Joyful Women Organization (JOYWO), a national non-governmental organization that promotes Socio-economic empowerment of Kenyan women through supporting their involvement in livelihood projects

The reason why table-banking can be a game changer for women in development if well harnessed, is that they tend to have smaller businesses and operate in sectors that require little initial capital, such as retail and services.

Furthermore, women are less inclined to expand their businesses rapidly, and choose to use less external capital when they do expand. They tend to be more risk-averse and more cautious about borrowing from formal financial institutions owing to fears of losing collateral.

Women should not be seen as the beneficiaries of the trickle-down effect of Africa’s growth, but must instead be incorporated within the growth. African women form the majority of the continent’s population, yet they lag behind compared to men. Bank account penetration among women in sub-Saharan Africa is about 22 per cent, compared with 27 per cent among men.

There are numerous social and economic benefits that a country can gain by giving more women greater access to formal financial services. This is due to the fact that women tend to invest their discretionary income in the education of their children, the healthcare of their family and improving their housing to a far greater degree than men. These are all important generational changes that would result in long-term poverty reduction.

There is a notable difference in the way men and women save. Men save more initially, but also withdraw their savings frequently. On the other hand, women save smaller amounts over a more frequent period, but leave their savings in their accounts. Another positive contribution is that women are good in loan repayment at 99 per cent repayment rate making them good borrowers. 

However, there are certain elements that must be taken into consideration if financial service providers wish to reach more women. First and foremost, is security. All customers will want to ensure that the bank will safeguard their funds. Confidentiality is also important, as women want to know that they control information about what they are saving for, how much money they have and where the money is kept. Thirdly, it is essential for women that banking is convenient.

Mobile banking fits the three criteria necessary for attracting women to financial products–security, confidentiality and convenience. This makes it a good opportunity for increasing women’s financial inclusion because 70 per cent of financial transactions take place outside of the formal sector.

The government effort to enhance financial inclusion in the country cannot go unnoticed. The Uwezo Fund which is a flagship programme for Vision 2030 is aimed at enabling women, youth and persons with disability access finances to promote businesses and enterprises at the constituency level, thereby enhancing economic growth towards the realization of the same and the Millennium Development Goals No.1 (Eradicating extreme poverty and hunger) and 3 (Promote gender equality and empower women).

More important to note, is that despite the concerted efforts to ensure easy access to finances by various industry players, there still exist a number of social and legal structures that discriminate against women. Women are still viewed as financially risky.

Under most customary laws, women often do not have the right to own land or property. Customary practices favour men’s access to real estate, which in turn affects their access to higher levels of credit and their ability to find business premises. Over 70 per cent of land in African countries is held under a customary tender system that favours men. Allowing alternative collateral security in the form of moveable property would be a positive step to solve this problem.

The other impediment to providing financial services to the poor through branches and other bank-based delivery channels is the high costs inherent in these traditional banking methods. The amount of money expended by financial service providers to serve a poor customer with a small balance and conducting small transactions is the big challenge many banks encounter.

Financial illiteracy presents a further test especially in rural areas and among the urban poor. This has led to a lack of knowledge on how to manage formal financial products. Facilitation and training activities for rural women folks on financial literacy need to be developed further.

Going forward, financial service providers have a role to play in using its convening power to work with partners and ensure a major impact on more women. Women should also be told to take the lead in the development of micro-financing systems and the financial inclusion initiatives. Additionally, the popularity of mobile banking needs to be seen as an opportunity to develop specific products for the female market segment.

There is need to examine the underlying factors that hamper women’s access to more financial services in regard to the legal and socio-economic barriers. Research has shown that the difference in usage of financial services between men and women diminishes considerably at higher levels of education.

The writer is KCB Director Retail Banking.

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