Department of Social & Policy Sciences

Report published on how financial services can be designed for low income markets

Wed May 14 17:06:00 BST 2014

Financial Sector Deepening Kenya has published two papers arising from a commissioned research project undertaken by Dr Susan Johnson on Financial services, social networks and financial practices: investigating use and impact.

In Kenya, mobile money transfer (MMT) has become hugely popular and some 62% of the adult population now use it. Recent research has found that MMT is facilitating informal interpersonal transfers that are far more varied and complex than suggested by the ‘send money home’ domestic remittance entry-point rationale of M-Pesa (Johnson, Brown & Fouillet, 2012) and suggests that it has enabled informal financial sector transactions to grow and operate more efficiently offering increased competition to the formal financial sector.

This report shares findings from an investigation of the types of exchanges involved in interpersonal transfers, the social relationships involved, the nature of these transactions, and the contexts in which they occur. It highlights the importance of the relationships involved in these exchanges and the values that they embody. It shows how relationships are consolidated and deepened through the giving and receiving of resources. It concludes with an examination of what these may imply for financial services providers and their customer relationships.

Summary findings from this in-depth report have been brought together in an Insights Note with those of research by Dr Froukje Krijtenberg of the VU University Amsterdam which looks at the language used for the core financial concepts of saving and borrowing, and explored some of the social and cultural practices that these concepts involved. Together this research suggests some significant differences between the concepts, practices and the values that underlie everyday resource exchange and those prevalent in the formal financial sector. When encountering the formal sector it is therefore likely that low-income people bring their language, concepts, ideologies and values with them. Bridging the divide between these everyday concepts and formal financial concepts and practices is part of the key to being able to develop more appropriate products and services that will support financial inclusion.