Kenya's Payment Market: Identifying an Enabling Environment for Government to Person Transfers Through the Banking Sector

Identifying payment infrastructures to support social protection payments in Kenya

This paper describes the supply of financial services in the retail banking market in Kenya. It identifies opportunities for using current and alternative payments infrastructure to support social protection payment (SPP) transfers.

The four main groups of financial service providers in Kenya include commercial and mutual banks, Kenya Post Office Savings Bank, MFIs and Savings and Credit Cooperatives. High cost of using other banks' infrastructure makes transactional banking unaffordable for low income customers. Key findings include:

  • Banks need to create low cost, accessible new account opening procedures that can operate in conjunction with the SPP application process;
  • Low cost branches or agencies and new channels such as cell phone banking and mini ATMs can extend the reach of the payments system to where all recipients reside;
  • Linking SPPs to the creation of a low cost bank account and ensuring that the cost of these accounts is carried by the payments provider could help the Kenyan payments system enhance access.

The study concludes that payment providers can supply transactional services to provide other cost effective services. Regulators, financial institutions and SPP providers need to cooperate to create an environment conducive to providing low-cost transactional services.

About this Publication