Inequality of Opportunity in Financial Inclusion in Kenya: the Gender Perspective

Abstract

Equitable opportunity to the access of financial services to all is paramount in ensuring social inequalities and injustices do not act as barriers to enhancing financial inclusion. This paper investigates how inequalities in financial inclusion influences gender inequalities and the circumstances that drive inequality of opportunity. The United Nations Capital Development Fund (UNCDF) identified financial inclusion as a major promoter of various Sustainable Development Goals and can be used as a tool to alleviate poverty and promote inclusive economic growth. In Kenya, tremendous progress has been seen in financial inclusion with the number of individuals who are reported to be financially included growing from 75.3% in 2016 to 82.9% as of 2018 according to the 2019 Fin Access Household Survey report. Although a reduction in unequal distribution in gender, income and wealth gaps has been registered, women’s use of formal financial services is still low, hence the need to shift focus from access of financial services to inequality of opportunity that defines inclusivity. The National Fin Access household data survey for 2018 was used to measure financial inclusion through a multidimensional index and the Human Opportunity Index (HOI) is used to measure inequalities that affect the delivery and consumption of financial services using the principle of equality of opportunity. This research employs the human opportunity index due to its capability to systematically examine existing policies and identify inequalities that ought to be addressed. Universally used indicators of financial inclusion which are; country characteristics (quality and legal frameworks that govern financial institutions, cost of opening bank accounts, political stability, and the element of trust) and individual characteristics (level of education, gender, employment status and residential area) provide solely the coverage level of financial services but does not demonstrate the differential intensity across different subclasses or subgroups, therefore, the human opportunity index measures the inequality in the apportionment of rudimentary services. In order to quantify the contribution of each circumstance variable, the Shapley decomposition method was adopted. In conclusion, the analysis shows the purpose of measuring inequality of opportunity in financial inclusion and provides vital insights to policy makers on policies that reward those who experience inequalities due to effort and compensate those who experience inequalities due to circumstances