Kenyan Government Expands Insurance and Social Security via Digital Finance

Last week the Kenyan government officially kicked-off Huduma cards, a fintech initiative aimed at bolstering government services in the country and digital financial inclusion.

The program leverages partnerships with Mastercard and a handful of prominent banks. If successful, the new cards will simultaneously improve the government’s functioning, enroll more citizens in key government services like health insurance and social security, and provide digital financial services to many unbanked Kenyans.

How does the program work? Huduma cards are issued throughout the country at the government’s preexisting Huduma Centres, which provide citizens with the gambit of government services. The cards will also be available at the partner banks, which include the Commercial Bank of Africa, Diamond Trust Bank, Equity Bank, and Kenya Commercial Bank.

Those who register for Huduma cards will use them to receive social benefits and other payments from the government, as well as to pay for government services. Powered by Mastercard, the cards also serve as a prepaid card solution anywhere Mastercards are accepted – in stores, online, via phone, and at Mastercard compatible ATMs. There are corresponding online and mobile phone payment portals for Huduma card holders. Registration doesn’t entail any fees or require a credit history or preexisting bank account. For many, Huduma could serve as a first formal bank account.

One of the most compelling features of the program is that when registering for a Huduma card users will automatically be enrolled in vital government services including the National Social Security Fund and the National Hospital Insurance Fund, bolstering the expansion of savings and insurance in the country.

This is Kenya’s first multipurpose social payment card with payment functionality. It’s part of Kenya Vision 2030, the country’s development program pertaining to 2008 through the year 2030. By creating a unified payment gateway for government services, the Huduma cards should improve efficiency, transparency, and accountability.

The formal roll-out of the program follows a successful pilot and will focus on efforts to ensure access to the cards, education on the benefits of the cards, and boosting card usage.

We look forward to closely following the program’s roll-out. Our recent CFI paper “Is G2P an On-Ramp to Financial Inclusion?” found that although programs like Huduma have the potential to increase formal financial inclusion, to-date the evidence ultimately suggests that government-to-person (G2P) beneficiaries do not take advantage of the basic and common functionality of these programs.

In the figure at right are key mechanisms identified in the report by which G2P payments could lead to greater financial inclusion. Of key importance to the success of Kenya’s program in serving as an on-ramp to financial inclusion will be effective education on the Huduma cards and effective relationship-building between cardholders and both Huduma Centres and participating banks.

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