What do the Financial Diaries Tell us About Financial Products and the Poor?
Last quarter saw the launch of one of the most in-depth pieces of research FSD Kenya has ever undertaken. We tracked the financial lives of 300 low income Kenyan households for over a year. The resultant ‘financial diaries’ gives us some exceptionally rich insights into what it means on a day-to-day basis to be poor. There is more detail on the study in FSD Kenya’s latest newsletter. The findings resonate with much other research in which FSD Kenya and others have been involved in the last few years. These converge on a sobering conclusion: we remain far from a point at which we can say that financial markets are working for the poor.
This isn’t to say that the innovations we’ve seen don’t represent important and laudable achievements. The problem is the disconnect which exists between how poor people see and manage their finances and what is offered by financial institutions. In part, of course, this simply reflects familiar challenges. You can’t afford to pay much to manage an income of KShs 2,000 per month. Average transaction costs have to come down dramatically if greater usage is to become an option. But suppose we were miraculously able to exploit the full potential of technology and reduce costs to near zero. How much real value would the participants in the diaries study see in mainstream products currently on offer?
There is much talk of late about the need for client-centricity in financial inclusion. But how do we go beyond an attractive sounding catchphrase to action? One modest suggestion, echoing work by independent researcher Ignacio Mas, is to stop all this talk about financial products. It seems doubtful that the people whose lives are so vividly depicted in the financial diaries think they want any financial products. Rather they need solutions to real world problems – juggling competing demands, challenges and opportunities in conditions of scarcity, risk and downright uncertainty. Perhaps we need to start by thinking hard about how some of the stories in the diaries could have had better outcomes. Only then should we start trying to create the tools which could help make this happen. FSD Kenya will be devoting considerable effort in the coming months to applying this approach. As ever, we are looking for partners in this endeavour.