How new technologies are driving financial inclusion in Kenya

Wednesday September 06 2023

New technologies like USSD, SRL, and cryptocurrency can potentially include all Kenyans in the financial system. PHOTO | COURTESY

By Nation Team

Inclusivity in the financial system is desired by all nations. It enhances economic efficiency, stabilizes the financial system, and protects vulnerable citizens. In Kenya, a developing economy, the government is exploring various measures to ensure everyone participates in its financial system.

New technologies like USSD, SRL, and cryptocurrency can potentially include all Kenyans in the financial system.

Mobile payment offers accessibility for all

In developing countries, mobile payments such as Bangladesh's bKash, Cambodia's Wing, and Tanzania's M-PESA are important in financial inclusion. These services use Unstructured Supplementary Service Data (USSD) to connect with customers.

USSD is vital in financial inclusion. It has become a vital tool for offering mobile financial services to low-income individuals. By dialing numbers starting with * and ending with #, users already engage with USSD.

According to 2016 data, 96 percent of households in Kenya used mobile money M-PESA. The growth in mobile phone penetration contributes to Kenyans' use of mobile-based payment methods. This method is considered more straightforward than others.


Despite that, the adoption of mobile payment still meets some challenges. Certain groups — usually impoverished, have lower educational attainment and are predominantly female — have limited access to mobile phones and data.

Past research also revealed that phone owners with higher education may not use their privilege to exercise the so-called savvy money management methods, such as savings. They have the means to do it, but for some reason, they don’t.

These findings challenge the commonly optimistic view of mobile money as a key avenue for financial inclusion. It aligns with qualitative research suggesting that Kenyans have diverse needs and prefer to have their money circulate actively.

Furthermore, potential issues arise when mobile network operators (MNOs) control financial services and essential communication infrastructure like USSD. This can hinder competition and impact benefits like lower costs and improved services for customers.

Entertainment sector boosts inclusion

Entertainment avenues like Simulated Reality League (SRL) are also transforming how people use their money by engaging in virtual sports simulations and digital entertainment. They are designed to mimic real-world sports such as cricket.

SRL today  still follows the same basic formats: Test, One-day Internationals (ODI), and Twenty20 (T20). Unlike real matches that can extend for hours due to various factors, games last for two hours without interruptions.

In a computer-generated Twenty20 match, there are 20 overs, each with six balls, and betting options for every over and special bet for the beginning and end of the game, making it more streamlined without delays caused by penalties or injuries.

SRL cricket offers similar betting markets as official matches, including options like match winners, coin toss winners, ties, and predictions for top batters and bowlers.

Authorities remain cautious about crypto

As digital currencies gain traction, traditional banks remain cautious due to perceived risks that outweigh potential benefits. In 2015, the Central Bank of Kenya (CBK) warned about the risks of cryptocurrencies due to their unstable nature and lack of rules. While they suggested people avoid trading, they didn't ban it.

Kenyans can legally buy and sell cryptocurrencies. In fact, Kenya holds over $1.5 billion in Bitcoin, about 2.3 percent of the country's total value. This doesn't even count other tokens, like Ethereum or Dogecoin. This shows that Kenyans still embrace cryptocurrencies despite the CBK's advice.

While concerns about digital currencies often revolve around risk and complexity, they can benefit banks and customers. Cryptocurrencies are alternatives to conventional banking. They operate without intermediaries and beyond the control of single entities. Instead, crypto transactions rely on the blockchain's code and a decentralized structure.

However, the central bank's control of crypto could lessen the asset's appeal and challenge banks' entry into the field. The decentralized nature of cryptocurrencies raises questions about the central bank's control if digital assets gain widespread adoption.