How Credit Reporting Can Unlock a More Inclusive and Prosperous Kenya

Financial inclusion is a crucial pillar for economic growth and poverty alleviation in Kenya. But despite considerable progress in areas like mobile payments and banking, a substantial portion of the population, particularly in rural areas, remains financially underserved and out of the financial system mainstream. 

Make no mistake, we have made significant strides in the past 15 years. In 2006, only around 57% of Kenyans had access to financial services, of which 32% was reported to be informal. Today, around 85% of men and 81% of women have access to formal financial services. But if we want to unlock our full potential for economic growth, we must get the remaining 15-20% of Kenyans into the formal financial services net.

These excluded and underserved individuals are not just numbers. They represent untapped economic potential, innovation, and resilience. Their exclusion from the financial system means we are missing out on their potential contributions to the economy and stifling their entrepreneurial spirit. This leads to inequality and impedes social progress. 

The fact is that credit access is critical to consumer financial wellbeing and inclusion. By accessing credit products and services, consumers are better able to manage their daily and unforeseen financial needs. Often, credit inclusion allows economic advancement and upward mobility opportunities for consumers looking to start a business, buy a vehicle or a home, or to fund higher education. 

A frequently overlooked element in stimulating universal financial inclusion is credit reporting. What it does is to enable lenders to make informed decisions about lending to individuals and small businesses, particularly those with little to no collateral or formal credit history. There are currently around 20 million credit visible and active consumers in Kenya, which is less than 70% of the adult population. This means there is a large untapped market for credit services.

Ordinary consumers are increasingly becoming aware of the importance of building a credit history and checking their credit reports. Awareness in Kenya of credit reports rose from 29.6% in 2019 to 42.1% in 2021 , demonstrating that the person in the street is beginning to understand the critical role played by the credit information sharing mechanisms in the credit market.

At the moment, though, millions of Kenyan citizens don’t have a credit history. That is partly because there has traditionally been limited availability and reliability of alternative, non-credit-based data as a valid and verifiable source of insight into the historic and predictive financial behaviours of the credit underserved and underbanked. To increase financial inclusion for credit underserved populations, we must ramp up our efforts to use alternative data sources to provide a more complete picture of creditworthiness.

Consumers are leaving clues to their behaviour all over. We just have to find and create the frameworks to use that data for their benefit. Some of that data sits with mobile networks and digital wallets, as practically everyone has a mobile phone. Microlenders and Savings and Credit Cooperative Organisations (SACCOs) hold vast volumes of rich data on payment behaviours, from which anyone with analytics capabilities can extract insights. 

Digital and mobile lenders are another key cog in our collective efforts to enhance credit access. Their role has been made even more impactful through recent regulations like the Digital Credit Providers Regulation 2022, which put in place the guardrails we need to ensure a good borrower experience.

More than that, though, credit invisible consumers pay rent and municipal accounts, buy insurance, and pay school fees. This is all data that can be used to build a picture of someone’s credit behaviour and to create a risk profile, and it’s even more powerful when combined with conventional credit data.

By collecting and sharing reliable credit data, credit reporting can unlock access to credit for the previously excluded. This can be a game-changer for financial inclusion in Kenya, paving the way for increased economic activity, improved standards of living, and overall financial stability. Could credit reporting hold the key to a more inclusive and prosperous Kenya? I’d like to believe so.