The example set by Kenya's banks when it comes to not only reaching the unbanked, but also making a profit from them, is something that the rest of the world should look to emulate.

Banks in large swathes of Africa, Asia and Latin America have undergone huge expansion in the past decade. Many now rank among the world’s biggest. However, this rise, chiefly a result of booming economic growth, has done little to reduce the large numbers of unbanked people in many emerging market countries.

Sub-Saharan Africa is a case in point. Even in some of its most mature economies – such as Ghana, Nigeria and Senegal – no more than one-fifth of the population has bank accounts. Lenders have grown by focusing on the corporate sector and middle-class consumers, not the masses.

But Kenya’s banks are different. Since 2003, when just 3 million of the country’s 40-odd million people were banked, they have greatly expanded their reach among the mass population. Today, almost 15 million Kenyans have bank accounts and there is a widespread belief that it will only be a few years before at least half of them do. Kenyan banks have managed this partly by exploiting mobile phone technology. People can carry out almost all their banking needs – including applying for loans – on their mobiles (and not just expensive smart phones, but the older, clunky 2G ones as well).

Since 2003, when just 3 million of [Kenya's] 40-odd million people were banked, [Kenya's banks] have greatly expanded their reach among the mass population. Today, almost 15 million Kenyans have bank accounts and there is a widespread belief that it will only be a few years before at least half of them do

Equally as important has been the use of channels other than branches to sell banking services. Kenyans can now deposit money, withdraw cash, pay utility bills and apply for loans at agents used by lenders, be they petrol stations, small retailers or supermarkets.

The result is that the banks have done away with the need for extensive branch networks and greatly reduced their operating expenses. It now costs little for them to take on as customers even those only able to deposit very small amounts of money.

That ‘bottom of the pyramid’ banking is commercially attractive is clear from the Kenyan example. Despite the country experiencing growth rates below the sub-Saharan African average in the past five years, Kenya's banks have been among the continent’s most profitable, achieving returns on equity and assets of 30% and 3.7%, respectively, in 2010.

Most Kenyan bankers are confident such levels can be sustained for many years as even more of its population becomes banked. Lenders in other developing countries should take note.

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