> Posted by Susan Johnson, Centre for Development Studies, University of Bath, UK

This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at ACCION International.

On Tuesday, April 24, 2012, Susan Johnson will be discussing mobile banking and its implications in Kenya at the Center for Financial Inclusion. This event is open to the public and will be a brown bag luncheon discussion with Women Advancing Microfinance (WAM). For more information and to RSVP, please click here.

Savings have been seen as the “forgotten half” of microfinance for some time, and now the rapid growth of payment services over mobile phones suggests that these too have been a forgotten half! With some 15 million registered users of mobile money transfer services in Kenya, mobile payment services are meeting a vital need. But with access to a mobile money service often being treated as ‘financial inclusion’ in the policy discourse, it is also important to ask whether it really means the same for users as it does for policy makers.

The heart of the policy perspective is that with the increased access to the financial system created by the mobile phone, it will now be a much smaller step from using this service to accessing a wider range of services – especially deposit accounts. A key issue is then whether mobile money is used for storing funds and hence whether being a registered user is more than simply access to a transfer service.  Jack and Suri (2010) report that 81 percent of people in Kenya are ‘saving’ in their mobile. They arrive at this figure by using their own definition of ‘saving’ which is keeping money in the phone for at least 24 hours.  Would users agree with their definition?

In research for Financial Sector Deepening Kenya (FSD Kenya), we found that 34 percent of users reported that they had a balance in their phone at the time of the survey and that the majority were cashing out their transfers. This was a small, more rurally based survey, so it may be less surprising to find lower figures for ‘saving’ than in surveys that included urban areas. Some 34 percent of registered users in this  survey were holding money in their phones, and the median balance was Kshs300 (US$4). About half of these users indicated that one of the reasons for this was to have funds to send to family, relatives or friends when they need them.  The other main reason for holding funds there was safety and security.  A much smaller proportion indicated that they were ‘saving’ (approximately one-sixth of users).

Digging deeper into some local terminology for savings we found that there were different words being used.  Having a small reserve for emergencies has specific terms in local languages (muthithu (Kikuyu); ekagancha (Gusii) or kinandu (Kikamba)) while ‘saving’ meant something more along the lines of “keeping money for a purpose”after daily needs are catered for (kuiga mbeca (Kikuyu); “pulling together” okobekarania (Gusii);  kumbani mbesa in Kikamba)). Further, using informal financial groups (which are more often used than banks in our sample) involves “contributions” rather than “saving.”

So keeping a small fund of money in the phone resonates with the idea of the reserve. But this language also helps us understand reasons given for not having bank accounts. We frequently heard explanations along the lines of “the money I make is very little, and there is nothing to be taken to the bank” and that there is therefore nothing left beyond daily needs. In this way banks are not necessarily seen as places to ‘save’, rather they are frequently used to receive payments which are then withdrawn.

The point then is that we need to start taking care of the terminology we use for describing the phenomena we see and explore what it means from the perspective of users.   If most users do not perceive that they are ‘saving’ in a mobile money platform, this needs to be understood. Even if we interpret the storing of funds for short periods as a form of saving, it would seem important to understand the difference between this behaviour and what they may themselves refer to as ‘saving’,  and in turn what this means for their use of services. There are many potential reasons: mobile money may not be trusted as a safe place for much longer than it takes to move funds; or only small balances might be kept for similar reasons; returns may be much higher in alternative uses such as livestock which multiply; or, as I also argue as a result of this study, that holding funds in mobile wallets or in banks does not establish social connections which are useful to people compared, for example, to putting funds in groups.

So financial inclusion may be in the eye of the beholder, but for policy to be effective it seems important to ensure that it is in the eye of the user also.

To learn more, you can see the summary here, or the full report here. Also, for more information, check out Dr. Johnson’s recent blog post on CGAP Technology.

For more information on CFI’s Financial Inclusion 2020 campaign, sign up for updates here.

Dr. Susan Johnson is a senior lecturer at the University of Bath. Having started her career as a development practitioner, her priority is research that engages theory with policy and practice. She has been engaged with a number of research and action research projects relating to the microfinance sector.

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