Centre for Development Studies

Financial capabilities: conceptualising and investigating their role and relevance for financial inclusion in Kenya

February 2014 - December 2015

Principle Investigator: Susan Johnson

Research Team: Silvia Storchi

Funding Body: Financial Sector Deepening (FSD) Trust, Kenya

Total Value of Award: £55,407

Overview of the project

The concept of financial capability is gaining ascendancy in discussions of financial inclusion. The policy debate over financial inclusion is increasingly concerned with the quality of access and this raises concern for the ways in which users of services engage with services on offer. In developed countries the areas of financial literacy and financial capability have rapidly grown, with a causal relationship between the two increasingly, though not universally, accepted. The definition of a financially capable individual is still a source of debate, especially when the definitions are applied in different contexts.

Only recently has financial capability been studied in the development field and it can be argued that current assumptions on financial capability may not be valid for poor people living in developing countries. Thus, further research is needed to provide a theoretical framework for this concept and start to explore its role and relevance  for poor people seeking to pursue strategies that enhance their wellbeing. 

This study aims to examine the theoretical basis of financial capability, including a literature review to lay the foundation of financial capability. This will cover literatures on financial education and financial capability, behavioural economics studies of financial behaviour, and the psychology and anthropology of money.  Sen’s capability approach will also be reviewed to assess what contribution it can make to developing a framework for financial capability. The fieldwork will be conducted as an in depth qualitative study in Kenya during 2014 and 2015.

Key research questions are:

  1. How can financial capability be theoretically conceptualised? In what ways is financial capability relevant as a human capability?
  2. What does it mean to be financially capable in Kenya? What are the valued capabilities of poor and low-income people?
  3. How is financial capability viewed from the perspective of poor and low income people?
  4. What influences the achievement of financial capability by poor and low income people?
  5. What enables poor people to transform their financial capabilities into valued functionings?

The project will be undertaken by Silvia Storchi as part of her doctoral studies at the University of Bath under the supervision of Dr Susan Johnson.

Intended outputs and impacts

  • A report including the literature review and development of conceptual framework to be finalised by October 2014.
  • A report on secondary data available on financial literacy and capabilities in Kenya with be produced in September 2014.
  • An NVIVO database containing all transcribed interviews will be submitted to FSD by December 2015.
  • A final report incorporating FSD comments and additional field work findings is planned for December 2015.

For further information about this project, please contact:

Dr Susan Johnson: