Financial services, particularly in the form of savings and loans, are key tools toward wealth creation and economic development. Yet worldwide, 2.5 billion adults are unbanked, including an estimated 77% of all adults in Africa (World Bank). They operate solely in cash or through barter, and, in doing so, assume increased personal and financial risk, including through higher transaction fees, unfriendly borrowing terms in the informal market, and a lack of recourse in the event of loss or theft. Meanwhile, close to 200 million micro to medium enterprises in developing economies lack access to affordable financial services and credit, which stymies business growth and development.
Even with a bank account, low levels of financial literacy and knowledge make it difficult for people to navigate and use financial services and often leads to inappropriate financial decisions, especially for the poor. Without improved capability and tools to plan and project income and expenses for their households or small enterprises, people with low financial literacy are exposed to added risk by borrowing from informal sources, saving too little, and failing to access appropriate financial services. As the financial landscape continues to evolve rapidly and offers increasingly complex products and services, low-income people are at risk of falling further behind.
When Equity Bank was formed in the 1990s, only 4% of Kenya’s population was banked. Low income people lacked conventional security that then hindered them from being financially excluded, as they had no collateral or credit history. Thus, most banks confined themselves to corporates and upper class clients. Equity Bank made the decision to focus on the majority, who had previously been unbanked, with the goal of helping people living at the bottom of the pyramid break the cycle of poverty.
To improve financial capability and inclusion, in 2010 and in partnership with The MasterCard Foundation, EGF launched the Financial Knowledge for Africa (FiKA) programme to deliver quality financial literacy training and services to low-income women and youth throughout Kenya, and particularly those engaging in entrepreneurial ventures. The training includes a 13-week classroom-based training covering budgeting, saving, financial services, and debt management concepts and methodologies.The programme’s aim is to increase financial capability (knowledge, skills, attitudes and behaviours) that lead to improved money management practices, and ultimately launch beneficiaries on journeys of financial inclusion, economic empowerment, increased productivity, and financial security.
In addition to FiKA, EGF’s financial literacy programme, EGF in partnership with Equity Bank implement a number of financial inclusion initiatives, including:
Hunger Safety Net Programme (HSNP): HSNP is a Government of Kenya social protection intervention in collaboration with development partners, DFID, AusAID, and FSD Kenya, and executed by Equity Bank. The programme provides aid assistance to poor families with vulnerable dependents in arid and semi-arid regions of Kenya and includes these families into the financial system, enabling them to leverage social payments to borrow loans or invest in microenterprises.
Social Payments for Food Security: Equity Bank and EGF provide a platform for social payments and financial literacy training to beneficiaries of community initiatives including: United Nations World Food Programme (WFP) Cash for Assets Initiative, Fresh Food Voucher payments in Dadaab, and the Cash Lite Project in Merti, Isiolo – a cashless project implemented by Equity, The MasterCard Worldwide and WFP, enabling beneficiaries to access food through electronic payments.
Orphaned and Vulnerable Children (OVC) Programme: The OVC Programme is a partnership between the World Bank and the Government of Kenya, with financial support from DFID and executed by Equity Bank to provide bi-monthly cash transfers to vulnerable households in 25 districts in Kenya, using biometric smart cards and a network of POS terminals.┬á The objective of OVC is to provide a social protection system through regular and predictable cash transfers to families.
Fanikisha Initiative: Fanikisha Initiative offers capacity building and credit facilities that empower women to expand their enterprises, create wealth and employment, and serve as role models to encourage other female entrepreneurs.
Agency Banking: Equity Bank conceived a model of contracting third party retail networks as Agents, who are authorized to offer selected products and services on behalf of the Bank.This enables customers to access financial products and services at a location nearest to the customer, thus breaking down certain barriers to financial inclusion, especially for low-income people who live in the remotest rural corners of the country as well as urban and peri-urban areas, including informal urban settlements.
Mobile Banking: Equity Bank has a Mobile Virtual Network Operator (MVNO) which offers banking products on a secure mobile platform coupled with a financial literacy training in order to reduce the cost of banking, and improve financial capability, especially for and among low-income people.
Equity Bank also leads financial inclusion efforts focused on emergency cash transfers as well as services and products geared towards smallholder farmers.
Since 2009, Equity Bank and EGF have:
- Dispersed over KSh16.31 billion(nearly US$ 174 million) to 310,927 beneficiaries
- Trained 21,948 beneficiaries on financial literacy
- Advanced credit to youth and women in more than 7,500 lending groups across the country, with an outstanding loan balance of over KSh 3 billion (over $31 million)
- Provided 155,800 households with regular cash transfers, including transfers which are meant to support the social protection for orphans and vulnerable children as well as 275,000 households with emergency interventions.
- Offered EquityÔÇÖs Fanikisha loan products for women, which have increased loan repayment periods and reduced interest rates, and include a special fund of KSh 5 billion (US $58.8 million) exclusively for rural women.
- Facilitated funds transfer to 396 schools targeting 28,000 primary school going children.
In nearly all instances, EGF and Equity Bank’s work in financial inclusion is purposely dovetailed with other ongoing efforts by Kenya government ministries, development partners, nongovernmental organisations, and other to reduce poverty.
The Permanent Secretary in the Office of the Deputy Prime Minister and Ministry of Local Government Prof. Karega Mutahi has hailed the financial Knowledge for Africa FiKA as a catalyst to economic development.
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Because EGF adapts its financial literacy training to suit the needs of various audiences, Emily and her husband could overcome their reservations