FSD KENYA: TEN YEARS OF A MARKET SYSTEMS APPROACH IN THE KENYAN FINANCE MARKET

This case study examines the ten-year experience of FSD Kenya (2005-2015), an independent trust that applied a 'Making Markets Work for the Poor' (M4P) systems approach to deepen the Kenyan financial sector. The document analyzes the organization's impact on financial inclusion, its role in facilitating digital finance and public infrastructure, and the lessons learned from its successes and failures in capacity building and innovation.

• Kenya experienced a dramatic increase in financial inclusion between 2005 and 2015, with the proportion of adults accessing formal financial services rising from 27.4% in 2006 to 66.7% in 2013, representing 8 million additional people.
• FSD Kenya's support for Equity Bank was a major success in supply-side capacity building, helping the bank grow its credit portfolio by 346% in the two years to December 2008 while reducing loans at risk from 13.2% to 8.6%. This created a 'demonstration effect' that incentivized other commercial banks to target the low-income market.
• FSD Kenya played a critical role in the success of M-Pesa by influencing the Central Bank of Kenya (CBK) to adopt a 'Letter of no Objection' approach, creating the regulatory space necessary for the service to launch and grow without being blocked by conservative banking regulations.
• The M-Shwari product, a collaboration between CBA and Safaricom supported by FSD Kenya, reached over 11 million accounts by 2015. FSD Kenya provided technical input on credit scoring and financially underwrote experiments to increase the credit acceptance rate for poorer customers from 42% to 57% in December 2014.
• Efforts to build capacity in the SACCO sector were largely unsuccessful because FSD Kenya underestimated the strength of informal rules and the lack of incentives for SACCOs to change. An external review in 2015 found that the sector's weaknesses remained largely the same as in 2005.
• FSD Kenya facilitated the development of critical 'public' infrastructure, including a Credit Information Sharing (CIS) system and an interoperable payments 'Switch' for banks. While these are long-term projects, the CIS system saw monthly demand for credit reports grow to 200,000 by 2015.
• The organization established a significant research function, most notably through the FinAccess surveys. However, this function remains unsustainable as FSD Kenya continues to be the principal funder and manager, with limited private sector ownership.
• Interventions in the 'real economy,' specifically agriculture value chain finance (VCF) and SME finance, had little impact. The VCF project failed due to a lack of technical leadership within FSD Kenya and lukewarm commitment from finance providers.
• FSD Kenya's organizational form as an independent trust provided significant operational advantages, including greater flexibility, neutrality, and efficiency. A study showed 88% of its spend went to programs, compared to 60-70% in contracted-out models.
• Despite overall gains in financial inclusion, the benefits have been skewed toward those above the poverty line. Lending to agriculture, the primary livelihood for the poor, actually decreased between 2000 and 2012, falling from 8.7% to 4.9% of total credit.

APA

Gibson, A. (2016). FSD KENYA: TEN YEARS OF A MARKET SYSTEMS APPROACH IN THE KENYAN FINANCE MARKET. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/FSD-Impact-Study.pdf

Chicago

Gibson, Alan. FSD KENYA: TEN YEARS OF A MARKET SYSTEMS APPROACH IN THE KENYAN FINANCE MARKET. FSD Africa, 2016. https://fsdafrica.org/wp-content/uploads/2025/05/FSD-Impact-Study.pdf.

Wikipedia

{{cite report |last1=Gibson |first1=Alan |title=FSD KENYA: TEN YEARS OF A MARKET SYSTEMS APPROACH IN THE KENYAN FINANCE MARKET |publisher=FSD Africa |date=August 2016 |url=https://fsdafrica.org/wp-content/uploads/2025/05/FSD-Impact-Study.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gibson2016fsd, author = {Gibson, Alan}, title = {{FSD KENYA: TEN YEARS OF A MARKET SYSTEMS APPROACH IN THE KENYAN FINANCE MARKET}}, institution = {FSD Africa}, year = {2016}, month = aug, url = {https://fsdafrica.org/wp-content/uploads/2025/05/FSD-Impact-Study.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }