Opinion: Kenya's decade of political and financial inclusion

Josephine uses M-Pesa for financial transactions. Photo by: The Advocacy Project / CC BY-NC-SA

Today, Kenya heads to the polls to select its next government. Past election campaigns in Kenya have been fraught with tension. This one is no different. Raila Odinga, the challenger to President Uhuru Kenyatta and a repeat runner-up for the presidency, has waged a heated effort to unseat the incumbent. He has also indicated that perceived foul play, similar to what allegedly occurred in the tumultuous 2007 election, could result in mass protests.

But despite the anxiety accompanying this election and the threat of more violence, the current state of affairs in Kenya actually gives cause for optimism. This year marks a decade of political and financial inclusion milestones that reflect both Kenya’s resiliency and its innovative spirit. No matter who wins at the polls, Kenya’s progress in creating a more engaged, representative democracy and a financial system that includes and serves more of its people is likely irreversible.

Ten years ago, two events — one catastrophic, one auspicious — had a monumental impact on present-day Kenya. One was the national election, whose dubious results and subsequent protests led to more than 1,300 people killed and 600,000 displaced. The post-election ethnic violence prompted an International Criminal Court investigation and called into question the credibility of the government from the start. The second, more encouraging, event was the launch of M-Pesa, a mobile money system that enables Kenyans to transmit funds on their cell phones. Prior to M-Pesa, Kenyans used unreliable shared taxis or expensive, slow remittance services to send and receive money. With M-Pesa, they can do so at the tap of a button.

A snapshot of 2007 would show Kenya's political and financial fortunes moving in opposite directions. Today's picture looks more hopeful. In the aftermath of the post-election violence, the president and opposition leader committed to overhauling a political system that exacerbated ethnic divides and a constitution that gave outsized power to the presidency in a winner-take-all system. In 2010, Kenya adopted a new constitution, which included a bill of rights for Kenyans and established an independent electoral commission to oversee future elections. Among the key structural changes was “devolution,” an attempt to decentralize power and improve citizen engagement. Previously, Kenya divided itself into eight provinces; today, after devolution, it consists of 47 counties. Each county has representation in Kenya’s bicameral legislature, along with one dedicated seat each for a female representative in the National Assembly.

The full impact of these measures is quickly being realized. Perhaps most meaningfully, Kenya made it through the 2013 elections with no serious outbreaks of violence, and the process was deemed free, fair and credible by international observers. Voter turnout in the 2013 elections was 86 percent, the highest in Kenya’s history and well above the 69 percent who turned out in 2007. (As a point of reference, the United States’ 2016 presidential election saw 55 percent voter turnout.) Prior to constitutional reform, independent candidates were not allowed to run for office. This year, nearly 4,000 independent candidates have thrown their hats into the ring, up from only 350 in 2013. Political influence is slowly being dispersed from the traditional power brokers to a young, increasingly engaged electorate representative of Kenya’s ethnic diversity.

As Kenya’s political system has become more inclusive, so has its financial sector. Ten years after M-Pesa’s launch, 96 percent of Kenyan households include at least one member using the mobile money service. Nearly 19 million Kenyans transmit funds with M-Pesa, conducting more than 10 million transactions on the network per day. Last year, MIT’s Tavneet Suri and Georgetown’s William Jack published a study finding that increased access to mobile money has lifted an estimated 194,000 households out of extreme poverty. M-Pesa has had a particularly beneficial impact on women, enabling 185,000 to move out of subsistence farming and into business or sales occupations. The rise of M-Pesa has spurred the growth of a range of digital financial services beyond money transfer. Mobile savings and microcredit products integrated with M-Pesa have been adopted by millions of Kenyans who previously were forced to hide cash under a mattress or borrow from informal moneylenders.

From established banks to plucky startups, the private sector has spurred into action to develop financial services around M-Pesa that serve Kenyans in innovative new ways. Digital credit delivered through mobile phones offers the promise of an instant small loan to microentrepreneurs with no formal borrowing history in rural areas in a convenient, affordable manner never before possible. M-Shwari, Kenya’s largest mobile savings and loan product, has disbursed more than $1 billion in loans since its launch in 2012. The digital footprint created by M-Pesa transactions has given rise to digital credit products that assess borrowers’ risk using only their phone data and not relying on in-person interviews. Venture capital is being deployed in Kenya at greater rates than ever to support the further development of innovative financial services that better serve Kenyans than the standard menu of banking products to which they were previously limited.

Kenya continues to face hurdles with both its governance and access to finance. Despite the improvements to Kenya’s political system, the specter of corruption and mismanagement looms over the incumbent government. Last year, the country’s anti-graft head alleged that as much as one-third of the national budget was lost to corruption. Rising food prices and questionable government debt management have added burdens on Kenyans of all backgrounds. In terms of financial inclusion, credit bureaus do not have national coverage, and the digital financial services industry, while off to a promising start, is still in its early stages of development.

Even so, it has been a remarkable decade of progress for Kenya. Ten years ago, the nation saw horrific violence driven by a political system in desperate need of reform. East Africa’s largest economy effectively excluded the majority of its population from the financial sector. Today, despite the challenges that persist, Kenya has made remarkable strides toward political and financial inclusion. An innovative financial product has empowered individuals countrywide, and, with elections around the corner, we will soon see how a more inclusive political infrastructure might do the same.

This article was updated on August 8 with additional information on Kenya’s 2017 general elections.

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About the authors

  • Sam%2520siegel%2520headshot

    Sam Siegel

    Sam Siegel is chief of staff to the CEO at Tala, a mobile technology and data science company, opening up financial access for underserved people globally. Tala’s smartphone app uses alternative data to deliver instant credit and help customers build their financial identities.
  • Zach%2520marks

    Zach Marks

    Zach Marks is director of new products and partnerships at Tala, a mobile technology and data science company, opening up financial access for underserved people globally. Tala’s smartphone app uses alternative data to deliver instant credit and help customers build their financial identities.