Kenya's Remarkable Journey: From Financial Inclusion to a Cashless Economy

In the last 12 years or so, Kenya has achieved remarkable success in financial inclusion, with over 80 per cent of Kenyan adults having bank accounts in 2023, up from lows of 25 per cent in 2007.

This leap is largely thanks to mobile money, which made financial services accessible to millions, according to the World Global Findex Report released last year.

At the heart of this transformative journey lies M-PESA, a ubiquitous mobile money platform that has revolutionized financial transactions, thus eliminating the need for traditional banking services.

The synergy between the government, regulators and mobile money operatorsplayed a pivotal role in Kenya's financial evolution. The government's proactive approach and supportive regulations paved the way for the widespread adoption of mobile-based financial services.

Mobile Money, in particular, emerged as a lifeline for millions, offering a convenient and accessible means of managing financial transactions without reliance on traditional financial institutions.

The statistics underscore the profound impact of this shift. Today, it's technically feasible to live in Kenya without the need for paper currency, thanks to the pervasive use of M-PESA and other mobile money products.

An estimated 60 per cent of the country's GDP flows through this mobile money channel, highlighting its pivotal role in the economic landscape.

However, amidst these achievements, a contrasting narrative emerges. Despite the impressive strides in financial inclusion, an estimated 71% of businesses in Kenya use cash as a means of payment according to a survey released by Visa in 2022.

This duality poses both challenges and opportunities for the nation's economic trajectory. Many individual and business transactions still happen in cash.

The benefits of a cashless economy are manifold. Enhanced transparency, reduced corruption and increased efficiency in financial transactions are among the numerous advantages.

A transition to a fully cashless system could further elevate these benefits, potentially transforming Kenya's economic landscape.

Imagine a scenario where cashless transactions constitute less than 10% of the economy. The implications are far-reaching, from streamlined financial operations to a more resilient and digitally connected economic ecosystem. The question that arises is whether Kenya is ready to embrace this next phase of growth.

History has always proven that there are trade-offs between short-term pain and long-term gain for significant transformations to be successful. Kenya is possibly at the same crossroads today, deciding on the future of the cashless economy by thinking differently as visionaries. Because past success in this area cannot guarantee future results.

As the statistics suggest, there is no looking back. Kenya's success in financial inclusion through M-PESA serves as a testament to the nation's ability to adapt and innovate. However, to fully harness the potential of a cashless economy, a collaborative effort is required.

Regulators and businesses must work in tandem to address challenges, enhance infrastructure and ensure that the benefits of a cashless economy reach every corner of society.

This juncture presents an opportune moment for all stakeholders to reflect on what will enable the next phase of growth. Aligning the country with the Government's Vision 2030, a vision of a fully digital economy, can position Kenya as a global leader in financial inclusion and the transition to a cashless future.

In a world increasingly defined by digital transactions, Kenya has the chance to not only lead in financial inclusion but also set the pace for a cashless revolution that transcends borders. The journey has begun, and the destination promises a future where financial services are not just inclusive but fully integrated into the digital fabric of the nation.

This article was first published on The Standard, on 30th January 2024.