Barriers to financial and pension inclusion in Africa

I am a strong proponent of financial and pension inclusion in Kenya and all of Africa. I have been working in this field for some time now, developing and putting into practice ideas that speak to the needs of those in the unorganized, underserved sectors of society.

We have to agree that in a continent like ours, where sizable portions of the populace are unbanked and lack access to necessary financial services, we will experience a much worse catastrophe in the future decades than what we are currently dealing with. We must accept the challenge and start a movement that has never been before. Without access to these services, people and communities struggle mightily to manage their money, accumulate wealth, and ensure their future. I've written a brief essay for you today that briefly discusses some of the factors that contribute to Africa's and Kenya's relatively low insurance and pension uptake. Sit down, take a cup of coffee, and share your opinions with me.

Lack of knowledge: Many people, mostly those working in the unorganized sector and, shockingly, those in the formal sector, are not aware of pensions, their advantages, or how they operate. This is partially a result of illiteracy, financial incompetence, and general mistrust.

Affordability: The cost of setting up a pension savings account and purchasing an insurance product used to be costly especially for those living in poverty and earn less than a dollar a day. It makes it difficult for people to get the coverage they need, even if they understand the importance of insurance or saving. Today, in less than one minute, once can set up a pension saving and insurance account in less than one minute. Technology has come handy as an enabler to drive inclusion and now, a fisherman in Lake Victoria or a herdsman in Laikipia can secure simple and easy safety nets and one can even pay for as low as Kshs 100 per year or 35 cents a day to put it into perspective. If you are wondering, Zamara provides such covers through Fahari. We have a few other players innovating for this group of people.?

Inadequate product offerings:?Traditional, conventional or boardroom products are not suitable for many people in the informal sector. A mama Mboga is worried about putting food on the table, a small holder farmer is worried about getting good yields or the cost of production, a Jua kali sector worker is worried about school fees for his children. The same applies to a Boda Boda rider, small scale trader, fisherman, domestic help to mention a few. This group of people face enormous risks daily that either affect them directly such as health, death, fire and burglary, pest and diseases, loss of income et cetera or affect their livelihoods. Traditional product offerings are not tailored to cover these types of risks that are most relevant to them. Human centred designing approach or getting the customer to participate in the design is the way to go. It is the only way to solve real problems affecting them. The beauty about this is you get the minimum viable product right which addresses the real problem in the market. Scaling the solution would be easy.?

Lack of Trust: Many people are distrustful of financial solutions and do not believe that they will receive fair treatment if they make a claim. There has been lack of transparency and accountability in the sector, as well as past experiences of customers who have been treated unfairly. I have encountered frustrated clients in the recent past whose claims were denied for valid reasons or through unethical tactics to avoid paying out. The customers felt like they are not getting a fair deal. As a result, they have been hesitant to take up new policies or make a claim in the future, even if they have a legitimate reason to do so. Their memories are fresh like yesterday.

Accessibility: Many people especially those in the rural areas lack access to financial institutions offering insurance and pensions mostly the absence of outlets or branches. A mama Mboga in the rural areas of Kenya or a small holder farmer in Mangochi, Malawi would be unable to access these services or even be willing to enrol even when they are able to through technology at the comfort of their homes -remember, trust is a fundamental concern.?

In conclusion, addressing these challenges requires a multi-faceted approach that involves educating people about the benefits of financial inclusion, making insurance and pension solutions more affordable, improving the product offerings, and building trust. In my next article, I will share my experience and learnings on how to overcome these barriers to achieve an enduring insurance and pension prosperity.