Let innovations widen financial inclusion

There is a huge demand for credit among Kenyans. People want money to start or expand their businesses; buy a house or simply acquire household appliances. Yet, majority of Kenyans cannot access affordable credit.

However, as a new product by Safaricom and two commercial banks has shown, technology is the harbinger for financial exclusion. Safaricom’s recently launched overdraft facility Fuliza lent out more than Sh1 billion in just one week.

It shows Kenyans are thirsty for credit. Who said the poor do not need credit cards? Safaricom CEO Bob Collymore said the M-Pesa service that advances credit - allowing users with inadequate funds to make purchases or pay utility bills - has seen overwhelming uptake. This is encouraging and we urge for more innovations to give customers a wide range of choices. There are, of course, several financial technologies, popularly known as fintechs, which have disrupted the financial sector including the mobile lending platforms such as Silicon Valley-based Branch and Tala.

With these platforms, borrowers do not need collateral such as title deeds, logbooks or pay slips as is the case with traditional lenders such as commercial banks. This has seen a lot of poor people who had been locked out of credit, access money.

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This is plausible, but there is also a need to be cautious, so that we do not leave consumers saddled with debts. These products should be finely engineered so that only responsible borrowers get credit. Otherwise, regulators need to put in place laws and regulations that will not curtail the fintechs, but unleash them.