Country: Kenya

Insurance for inclusive and sustainable growth – imperatives for action

Insurance has a strong role in combatting poverty and advancing development, in at least three ways:

Improving individual and household resilience
Insurance makes households more resilient in the face of financial shocks. Insurance also enables households to access services such as credit, health and education that may otherwise not be attainable to them.

Improving business resilience & productivity
Effective risk transfer is a fundamental part of corporate sustainability.
It also facilitates exports and imports, enables foreign investment and helps to ensure access – at better terms – to business financing.

Developing the demand and supply of capital
Insurance mobilizes capital through premium collection, its role in enabling business development and its linkages with the pensions market.It also pools capital into larger pots of funds that are more efficient to manage and invest.

Recognising the role that insurance can play in supporting sustainable development and growth, the UK’s DFID partnered with the World Bank, FSD Africa and Cenfri to conduct a series of diagnostics that explore how these three roles manifest in four countries in SSA: Ghana, Kenya, Nigeria and Rwanda.

This paper synthesises cross-cutting themes from the study countries and beyond and draws conclusions and recommendations on how to further develop insurance markets.

Green bonds programme Kenya – annual report 2017/18

Kenya Green Economy Strategy and Implementation Plan (GESIP) 2016–2030 has committed to investing $23.5 billion in Kenya’s green growth path. Moreover, investor demand for green bonds is getting stronger globally due to increasing evidence that “green” factors have a positive impact on long-term financial returns.

The Green Bonds Programme Kenya (GBPK) was launched in March 2017 with the aim of catalysing the market for green bonds.  Working together on this programme all partners recognise the outcomes will be larger and more sustainable – leading to a green economy for Kenya’s future generations.

Following the foundations laid by the Green Bonds Programme Kenya, the National Treasury has indicated that its debut sovereign green bond will be issued during the fiscal year 2018/19. This will make Kenya the first country in East and Central Africa to issue

Where are the flows? exploring barriers to remittances in sub-Saharan Africa

Remittance flows represent an increasingly important source of income for sub-Saharan Africa (SSA). Between 2012 and 2015, formal flows steadily grew at a higher growth rate than foreign direct investment (FDI) and official development assistance (ODA). As a result, the value of formal remittances sent into SSA today almost matches those of FDI and ODA. Formal flows between countries in SSA are greater than ever. However, since 2016, the value of formal remittances sent into the region is no longer growing. Much of which is migrating to informal channels as SSA still has the most expensive corridors in the world, both in terms of sending funds from outside as well as within the region.

Remittances act as key sources of financial support for households: they reduce the likelihood of impoverishment, contribute to improved health and education, and provide greater resilience to financial shocks. To maximise formal remittance impact in the region, the true cost of sending and receiving the funds needs to drop to incentivise higher formal flows. This does not only include a decline in the remittances prices but also improved access for senders and recipients at the first and last mile.

To offer a more detailed analysis of the barriers to formal remittances in SSA, a new report from Cenfri and FSDA outlines the complexities of achieving sustainable cost reductions and increased access for remittance senders and recipients.

Vol. 1 of a seven-part series marks the start by identifying the most prominent corridors within and into SSA in terms of volume, cost and importance for the economy. It also investigates the relationship between remittance flows and migration patterns, used as a proxy to identify pain points in specific corridors. This report is aimed at remittance stakeholders, policymakers and anyone who is interested in understanding the remittance market in SSA in more detail.

Vol. 2 investigates barriers based on deep dives in four different countries in SSA providing the overarching barriers to understand a highly complex value chain. Vol. 3 – 6 provides case studies of the four countries against the backdrop of their unique country context. Vol. 7 concludes with recommendations on necessary policy actions and multi-country approaches for remittance players.

Vol. 3 explores the state of the remittance sector in Uganda and unpacks the key challenges and best practices within the industry.

Vol. 4 explores the state of the remittance sector in Ethiopia.

Vol. 5 explores the state of the remittance sector in Côte d’Ivoire.

Vol. 6 explores the state of the remittance sector in Nigeria.

Vol. 7 aims to provide stakeholders that are active in remittance sectors with recommendations on how to systematically overcome the supply-side barriers to formal remittances in SSA.

Moving money and mindsets: increasing digital remittances across Africa

In 2015, the UK government committed to the UN’s Sustainable Development Goal (SDG 10.7c), which states that the global average cost of remittances should be no more than 3% of the send amount by 2030, with no single corridor being more than 5%.

With its goal to reduce costs and scale formal flows, the UK Department for International Development (DFID) and its Africa-based partner, FSD Africa, are interested in exploring whether there are ways of accelerating the migration of remittance senders from cash to digital channels.

FSD Africa and DMA Global’s research across 7 African diaspora communities in London aims to understand the reasons behind the existing preference for cash-based remittances in the UK-based Africa diaspora community and the main motivators that could – and are – being used for a switch to digital services.

Moving Money and Mindsets finds that the use of online remittance services has surged in recent years, with roughly half of the FGD participants now using formse participants, for the most part, report having switched to using online services within the last one to two years.

The FGDs suggest that the ‘stickiness of cash’ with respect to sending remittances, varies significantly between diaspora communities. Cash was found to be most ‘sticky’ amongst diaspora from DRC, Zimbabwe and Sierra Leone. These are also the ‘receive-countries’ with the least-developed domestic payment systems. A developed domestic payment system is essential for the growth of international digital remittance services. Conversely, the use of online services was most common (and cash least ‘sticky’) among the Tanzanian, Ghanaian and Kenyan participants. These are also the receive-countries with the more developed domes

Biometrics in digital financial services: an overview

This paper presents the results of a focussed, independent analysis of biometric technologies, and considers their application and acceptance for retail payments and conventional financial services for people in emerging economies. In particular, we consider the application of biometrics technologies for population-scale deployments in the retail financial services sector.

Funding the frontier: the link between inclusive insurance market, growth and poverty reduction in Africa

Over the last decade, insurance markets in sub-Saharan Africa (SSA) have grown from 4.5 million risks covered to more than 60 million risks covered today. However, according to this report, insurance penetration in SSA remains amongst the lowest in the world with life penetration at 0.3% and non-life at 0.5%, limiting its intermediation potential and contribution to inclusive economic growth and poverty reduction.

The report takes stock of the state of insurance markets across a sample of 15 countries in the region (Mauritius, South Africa, Botswana, Ghana, Kenya, Zimbabwe, Nigeria, Zambia, Senegal, Tanzania, Uganda, Rwanda, Mozambique, Angola, Ethiopia). It finds, although there is no universal development path of insurance sectors in SSA, they seem to be progressing, at varying speeds, through four different stages of market development: the establishment and corporate asset stage, the early growth and compulsory insurance stage, the retail expansion stage and the diversified retail stage.

The report highlights that, most countries in the sample are locked into the early growth and compulsory insurance stage of insurance market development due to a number of exogenous and endogenous factors, which serve as barriers to the role of insurance in growth. Exogenous factors include barriers such as low income levels, informalisation of the economy and limited financial sector development, while endogenous barriers include small markets, a shortage of skills and data, and limited distribution infrastructure.

Commenting on the report, Doubell Chamberlain, the Managing Director of Cenfri says:

Insurance contributes to growth and poverty reduction in many ways. Over the last decade, the focus in development circles has been on how insurance, or microinsurance, can support resilience, and encourage productive risk taking behavior, amongst low-income individuals.

There has been less of a focus on how insurance markets can support livelihoods of low-income adults through mobilising and intermediating capital for growth. We hope that this report stimulates a new discussion on the role of insurance in supporting economic growth in SSA and invite those interested to follow up with us or FSD Africa.”

Credit on the cusp report

Building healthy credit markets in Africa by 2026

African economies are currently undergoing dramatic changes, including a changing consumer base.  Absolute poverty is reducing as a new class of consumer—the cusp group—emerges.  This group (we call “cuspers”), which now accounts for 23% of sub-Saharan Africa’s population, covers a segment of active earners getting by on $2-$5 per day and straddling the formal and informal worlds.  For this group, healthy credit markets could expand opportunity and enable upward mobility, helping to build a true middle class.  But, for this to happen, credit needs to expand and to do so in healthy ways.

In the Credit on the Cusp project, we look at the experience of cusp group borrowers and the lenders who serve them in three distinctive markets—South Africa, Ghana, and Kenya—to better understand what healthy credit market development would mean for this group.  We explore some ways donors and policymakers can help build credit markets thaard mobility for Africa’s cuspers.

Risk, remittances and integrity programme

The five-year RRI programme is a partnership between FSD Africa and Cenfri. Its aim is to improve welfare and boost investment growth in sub-Saharan Africa. To achieve this, it works to strengthen the integrity and risk management role of the financial sector and to facilitate remittance flows within and into the continent

Savings groups national stakeholder meeting

FSD Africa and the SEEP Network convened a stakeholder meeting in Benin in February 2017 to explore the role of savings groups in contributing to broader development goals and activities in the country.

Skills development in financial institutions in sub-Saharan Africa

Skills shortages among financial institutions (FIs) in Africa have long been recognized as an important- and perhaps the most important- constraint to their growth. In late 2012, the Consultative Group to Assist the Poor (CGAP) conducted a global on-line survey which aimed to better understand the dynamics within the market for skills development and other services; and to develop guidance for funders to support market development.

Subsequently, FSD Africa and CGAP sought to better understand the demand for and supply of capacity building services for financial inclusion in Sub Saharan Africa (SSA) by digging deeper into available data from the 2012 CGAP global research.  The aim was to explore differences in responses by service provider type and clusters of countries/sub-regions.

The key highlights from the SSA analysis include: FIs acknowledge that the most significant short-term challenge they face is the lack of capacity to run their institutions professionally and regard risk management, strategic plnning and mid-level and people management skills as most needed; although FIS are aware of the availability of the services they need in the marketplace, they do not always regard these to be of high quality.  Lastly, capacity building providers face the challenge of finding, training and maintaining qualified staff for the provision of high-quality services