Collectively, East African nations have long been a powerhouse and pacesetters for other regions in the continent.
Despite recent trade wars among member countries, the region boasts a superior regional integration, greater political stability, higher rates of economic growth, and major investments in both national and regional infrastructure.
For Africans, one way to improve well-being is through financial inclusion – the adoption, usage, and sustainability of financial services. And unsurprisingly, financial inclusion in the Horn of Africa is way ahead of others.
A new report by the Alliance for Financial Inclusion (AFI) shows that Kenya and Rwanda are the region’s most financially inclusive economies. Both countries have the highest proportion of financially included adults – about 90 percent with access to both formal and informal financial services.
In third and fourth positions are Uganda and Tanzania with 78 percent and 72 percent respectively. Without comparing the individual countries against one another, these are outstanding numbers overall for the region.
Drivers of financial inclusion
As observed in the report, some of the key drivers of financial inclusion in the region include the use of cooperative agencies; expansion of bank and microfinance institution (MFI) branches; the rise of agency banking; and modernization of financial services such as mobile banking, automated teller machines (ATMs) and mobile money.
Particularly in Rwanda, community savings and credit cooperatives have seen more than 90 percent of the population live within a close radius of the Umurenge Saccos (Rwanda’s Cooperative Agency).
For Kenya, the proliferation and widespread use of mobile money services (including insurance and loan products) by groups underserved traditionally, with an enabling regulatory environment for digital financial services have aided financial inclusion.
More so, banks in Kenya are making efforts to move transactions away from banking halls to more easily accessible digital platforms like ATMs, Point of Sales (POS), mobile platforms and the internet. This has helped increase access to people who are traditionally excluded.
What other regions can learn from EA
Even though there are no exact figures on financial inclusion across other regions in Africa, available data shows that there is still a lot of work to be done. In Nigeria, the Central Bank unveiled a new policy to achieve 80 percent financial inclusion. While the mobile money sector in Southern Africa is, in general, less mature than in Eastern Africa.
Owing to smaller populations, it could be said that governments in East African nations have an advantage when it comes to achieving financial inclusion. This is evident in that Ethiopia, another member of the region and the second most populated country in Africa (after Nigeria), lags behind its neighbouring countries in terms of access to financial services.
Albeit, the lower rates of financial inclusion in other regions of the continent cannot be attributed solely to population figures. A common theme among the success story of financial inclusion in East Africa is the dedication and willingness of the governments towards achieving financial access for all.
Governments in other parts of sub-Saharan Africa should take a cue from the Horn of Africa, by creating an enabling regulatory environment for mobile money and other financial inclusion initiatives to thrive.
