Majority of Kenyans remain unbanked due to the existence of access barriers to financial services.

According to the Central Bank of Kenya Governor, Prof Njuguna Ndung'u, the low access to financial services is due to the existence of a myriad of charges by commercial banks which make banking services unaffordable to many people.

"Financial institutions need to lower the barrier of entry thereby enhancing access to their services which will be more effective than the use of any regulation," said Prof Ndung'u.

He cited minimum operating balance, valuation and legal charges for collateral for those seeking to borrow as some of the issues that make access to financial services "quite expensive and tedious to the majority hence shunning banks".

Prof Ndung'u made the remarks while addressing various stakeholders involved in enhancing financial services under the Financial Sector Deepening (FSD) programme.

It is estimated that 26 per cent of the adult population have access to financial services.

However, the need to protect customers from the numerous charges levied by banks is critical in enhancing access to financial services.

A study conducted by FSD shows that 64 per cent of Kenyans access loans from friends and family members while financial institutions command only 19 per cent of the loan market.

In terms of savings, most people still prefer 'mattress' saving, groups and co-operative societies.

"Family and friends constitute the largest source of access to credit services as they are trusted and will not use stringent measures such as confiscation of property to demand payment," the report said.

Full disclosure

In addition, majority of people still fear putting their money with banks as they will be charged to maintain their deposits.

This in effect has affected the rate of the country's savings denying financial institutions one of the easiest ways of mobilising deposits.

The inability of growing their deposits fast has forced banks to resort to other fund-raising means by offering higher interest rates to attract deposits.

The existence of information asymmetry where full disclosure is rarely offered to customers have been cited as one of the reasons affecting access to credit services hence impacting on the overall well-being of the economy.

For instance, the long and costly loan application procedures also discourages people from seeking bank loans and resort to other options such as pyramid schemes.

The run away success of mobile money transfer services is credited for its simple and easy operation and readily available information to clients.