Financial Inclusion of the Informal Sector of Marginalized Counties in Kenya

The informal sector in marginalized counties of Kenya faces significant barriers to accessing financial services, despite the critical role of financial inclusion in economic growth and advancements in financial technology. This research aims to investigate the extent of financial inclusion in these regions, focusing specifically on the informal sector. Based on the FinAcess Survey Report (2021), a purposive sampling method was used to select nine counties (Turkana, Mandera, Wajir, Marsabit, Garissa, Samburu, Tana River, Isiolo, and West Pokot) where financial inclusion rates are below 70%. A stratified random sampling technique was then applied to gather a sample of 320 respondents. Data were collected using structured questionnaires and analyzed with a probit model. The target population for this study comprised various small businesses operating within the informal sector, commonly referred to as the Jua Kali sector, in the counties of Samburu, Narok, Turkana, Garissa, and West Pokot. The businesses included in this population were primarily engaged in activities such as selling secondhand clothing, operating food canteens, managing grocery stores, and running small kiosks. Participants were selected based on specific inclusion criteria: they had to be available and willing to participate in the study, have an annual turnover between KShs 500,000 and KShs 2 million, and operate as sole proprietors or employ fewer than two workers on a weekly basis, depending on sales. Additionally, participants did not receive a formal salary. Respondents were required to be at least 18 years of age, ensuring that they held national identity cards, which are necessary for opening bank accounts and conducting transactions via mobile services. This age criterion also aligns with the parameters of financial inclusion, which encompass access to banking and mobile services. To gather qualitative data, semi-structured interviews were conducted with key stakeholders, including informal sector entrepreneurs, local financial service providers, and government officials. These interviews aimed to explore participants' experiences, challenges, and perceptions related to financial inclusion. Throughout the research process, the confidentiality and anonymity of all respondents were strictly maintained to uphold ethical standards.