may 2012 Savings for the Poor in Kenya anjana ravi and eric tyler savings for the poor innovation and knowledge network (spinnaker) Global Assets Project New America Foundation Acknowledgement The research for this project would not have been possible without the guidance, support, and participation of a number of players. In particular, the authors would like to express their gratitude to Jamie Zimmerman and Amolo Ng’weno for their assistance in conducting research and reviewing the report’s development. Thanks are also due to Jacqueline Irimu and Mediatrix Tuju, who provided tireless logisti- cal and research assistance. The authors would also like to thank Amrik Heyer and Felistus Mbole at Financial Sector Deepening Kenya and all the institutions who took the time to participate in the study. © 2012 New America Foundation This report carries a Creative Commons license, which permits non- commercial re-use of New America content when proper attribution is provided. 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Contents Introduction........................................................................... 1 .....Delivery.Channels.&.Technology...............................................19 ......Research.Objectives...................................................................2 .....Pricing.and.Fees........................................................................19 ......Research.Methodology...............................................................2 The.Impact.of.Technology.and. Mobile.Money.on.Savings...................................................20 Kenya.Financial.and.Savings.Landscape.Overview..............2 .....Mobile.Money.in.Kenya............................................................ 20 ......Changes.in.Poverty.and.Economic.Growth...............................2 .....Mobile.Money’s.Impact.on.Savings.........................................21 ......Demand.Side:.Saving.Habits.and.Usage...................................3 .....Mobile.Money.Agents.and.Agent.Banking...............................22 ......Supply.Side:.Access.to.Financial.Services.and.Savings............5 Conclusion...........................................................................26 Different.Savings.Service.Providers.in.Kenya.......................7 Annex.1:.Further.Data.and.Information. .....Commercial.Banks.......................................................................7 on.the.SPINNAKER.Website...............................................27 .....Microfinance.Institutions..........................................................10 Annex.2:.Savings.Product.Data.Entry.Form........................27 .....Savings.and.Credit.Cooperative.Societies................................ 11 Annex.3:.Summary.of.Product.Features.............................27 .....Non-Traditional.Savings.Providers...........................................12 Annex.4:.Key.Informant.Interview.Guides..........................28 .....Mobile.Network.Operators....................................................... 13 Annex.5:.Informant.Interviews.Conducted......................... 31 Savings.Product.Development.Data................................... 14 Annex.6:.Additional.Savings.Product.Data......................... 33 .....Breakdown.of.Product.Data......................................................14 Annex.7:.New.M-PESA.Fee.Structure.................................. 37 .....Uptake........................................................................................16 Annex.8:.Old.M-PESA.Fee.Structure...................................38 .....Target.Markets...........................................................................16 Annex.9:.Bibliography.........................................................39 .....Incentives.and.Services.............................................................19 Notes...................................................................................42 .....KYC.Opening.Requirements.....................................................19 Kenya’s financial market has caught the world’s attention. The rise of mobile money in Kenya has become the interest of financial inclusion experts, the excite- ment of mobile network operators, and an opportunity for financial institutions to rethink their products and services. However, the implications and transformative impact of will follow with an in-depth look at current savings prod- mobile money and other related innovations in the finan- uct development in Kenya through our detailed product cial landscape are often much less examined and under- and institution focused data collection. It will end with stood. In particular, Kenya’s supply of and demand for for- an examination of the impact of technology, specifically mal savings products, herein referred to as the “savings mobile money and agent models, on the financial sys- landscape”, might have the most to gain from the rapidly tem. Throughout the report, case studies will be used to evolving market, but the progress and opportunity often present a closer look at specific institutions and products remain largely overlooked. whose intricacies and innovations are shaping the com- plex Kenyan savings landscape. Through informant interviews, secondary research, and data collection at all levels of Kenya’s financial market This Kenya study is the second research project conducted including with financial institutions, researchers, mobile by the Savings for the Poor Innovation and Knowledge network operators, and government regulators, this study Network (SPINNAKER) to capture savings product data, will examine the changing savings landscape in Kenya on-the-ground perspectives, and efforts of local leaders and highlight innovations in product development, driving forward the field. In the end, the SPINNAKER approaches, regulations, and technologies. In particular, project works to aggregate, standardize and highlight the this report will be broken down into four main sections. landscape of information and data on innovative savings It will first examine the important underlying questions products for the poor by coordinating with thinkers and of why and how Kenyans save and provide an overview doers in the field. It is our hope that these country-level of the savings landscape’s recent progress. The report studies will help the field better understand the local con- will then explore the role, regulatory environment and text and innovative efforts of a particular financial land- impact of the different savings providers in Kenya, and scape and the role savings play in it. Table.1..Research.Methodologies.Used Tool Purpose Coverage Informant Interviews 30 interviews provided insight as to how The key informant interview guide can management at various institutions is dealing be found in Annex 4, and the list of with the rapidly changing financial landscape participating institutions in Annex 5. and how mobile money has affected their product development strategies. Primary Data Collection Data collected on 104 savings products across SPINNAKER’s Kenya Savings Product 20 institutions provided useful comparisons in Data Page2 order to determine innovative features and accessibility to the poor. Secondary Research A review of reports, financial statements, websites, SPINNAKER’s Kenya Resource Page3 leaflets, and flyers, among other materials provided information on the overall Kenyan savings culture. In addition, secondary research highlighted demand-side data to complement SPINNAKER’s primary supply-side data collection. 1 savings for the poor innovation and knowledge network Research.Objectives Figure.1..Percent.Change.in.Wealth.Index,. 1. To explore the landscape of savings products by.Province,.2006-2009 for the poor in Kenya, including mobile money’s impact and the response of formal financial insti- tutions to its emergence; 2. To bring out insights on product innovation and development in order to examine what features make a savings product accessible and useful to the poor; and 3. To identify gaps for future research on savings product demand, usage, and evaluation. Research.Methodology The study utilized three main research methodologies (Table 1): 1. Informant interviews with key institutions1 in the field including regulators, commercial banks, microfinance institutions, SACCOs, mobile net- work operators, and researchers, among others; 2. Primary data collection focused on capturing what makes the different savings products being offered unique; and 3. Secondary research to build upon the wealth of resources and data that already exist. Kenya Financial and Savings changing demographics in terms of poverty rates and eco- Landscape Overview nomic growth. Next, it will cover demand-side savings hab- In 2006, the Government of Kenya announced its Vision its and product usage by addressing the following questions: 2030, a development