Page 31 - DIY Investor Magazine | Issue 31
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   According to the World Bank’s Global Financial Inclusion (“Index”), 78% of unbanked adults have access to a mobile phone. In emerging and frontier markets, gradually increasing penetration of financial products, combined with supportive demographics, should create a backdrop that, for well-placed financial institutions, proves conducive to strong and sustained earnings growth for a long time to come. GAINING EXPOSURE TO THE OPPORTUNITY Through our bottom-up, fundamental approach, we have identified several companies where we believe this change is underappreciated by the market. KCB in Kenya, United Bank in Pakistan, and Bank of Georgia are all held in the Jupiter Emerging and Frontier Income Trust. While all three are small- capitalisation companies, they are large players in their home markets and are all embracing fintech opportunities to create new avenues for growth. KENYA COMMERCIAL BANK The potential for fintech to drive positive change is most evident in Sub-Saharan Africa, particularly in Kenya. The Kenya Vision 2030 blueprint, launched by the Kenyan government in 2008, made financial inclusion a central goal and, since then, dramatic progress has been made. Financial inclusion in Kenya reached 82.9 per cent last year and, while this means that around 17 per cent of the population is still excluded from access to formal financial services, the numbers have improved dramatically since 2006, when only 33 per cent of men and 21 per cent of women had access to financial services (in that time, the gender gap has also narrowed – from 12 per cent in 2006 to 5 per cent in 2020).3 ‘THE POTENTIAL FOR FINTECH TO DRIVE POSITIVE CHANGE IS MOST EVIDENT IN SUB-SAHARAN AFRICA, PARTICULARLY IN KENYA’ A large part of Kenya’s success has been down to the widespread usage of the mobile money platform, M-Pesa, which is now arguably the most successful mobile financial service in the developing world. M-Pesa was established by incumbent telecom operator, Safaricom, with KCB as its main banking partner. KCB leverages this burgeoning technology by offering loan and savings accounts with attractive fees and variable payment or savings periods. Over the past year, KCB has enhanced its mobile wallet platform, Vooma, which allows customers to save, borrow, send and receive money, pay bills, and buy airtime. Lending is the largest product on the platform, followed by savings. The bank is now doubling down on its payment services by significantly expanding the number of merchants and billers on the platform. KCB aims to have a million merchants on the platform over the medium term, up from just thirty thousand presently, with a view to having Vooma contribute twenty per cent to group revenues in two years’ time, up from five per cent today. KCB has established a dedicated division to oversee this transition and there are members of the management team, reporting to the board of directors, who have full ownership of these targets. Mobile transactions by KCB’s customers have rapidly overtaken in-branch transactions.       3Source: Kenya Economic Report 2020 Kenya-Economic-Report-2020.pdf ( 31 Diy Investor Magazine · Nov 2021 

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