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Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya

In: African Successes: Modernization and Development

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  • Franklin Allen
  • Elena Carletti
  • Robert Cull
  • Jun "QJ" Qian
  • Lemma Senbet
  • Patricio Valenzuela

Abstract

With extensive country and firm-level data sets, this paper first documents that the financial sectors of most Sub-Saharan African countries remain significantly underdeveloped by the standards of other developing countries. The paper also finds that population density appears to be considerably more important for banking sector development in Africa than elsewhere. To better understand how countries can overcome the high costs of developing viable banking sectors outside large metropolitan areas, the analysis focuses on Kenya, which has made significant strides in financial inclusion and development in recent years. The paper finds a positive and significant impact of Equity Bank, a leading private commercial bank, on financial access, especially for underprivileged households. Equity Bank's business model -- providing financial services to population segments typically ignored by traditional commercial banks and generating sustainable profits in the process -- can be a potential solution to the financial access problem that has hindered the development of inclusive financial sectors in many other African countries.

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This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 13362.

Handle: RePEc:nbr:nberch:13362

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Citations

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Cited by:
  1. Allen, Franklin & Carletti, Elena & Cull, Robert & Qian, Jun & Senbet, Lemma W & Valenzuela, Patricio, 2014. "Improving Access to Banking: Evidence from Kenya," CEPR Discussion Papers 9840, C.E.P.R. Discussion Papers.
  2. Beck, Thorsten & Cull, Robert, 2013. "Banking in Africa," Policy Research Working Paper Series 6684, The World Bank.
  3. : Daniel J. Henderson & Chris Papageorgiou & Christopher F. Parmeter, 2012. "Who Benefits from Financial Development? New Methods, New Evidence," Working Papers 2013-07, University of Miami, Department of Economics.
  4. Wamboye, Evelyn & Mookerjee, Rajen, 2013. "Financial development and manufactured exports: the african experience," MPRA Paper 46474, University Library of Munich, Germany.
  5. Wamboye, Evelyn & Adekola, Abel, 2013. "Foreign Aid, Legal Origin, Economic Growth and Africa’s Least Developed Countries," MPRA Paper 47846, University Library of Munich, Germany.
  6. Franklin ALLEN & Elena CARLETTI & Jun 'QJ' QIAN & Patricio VALENZUELA, 2012. "Financial Intermediation, Markets, and Alternative Financial Sectors," Economics Working Papers ECO2012/11, European University Institute.
  7. Lorenzo Casaburi & Michael Kremer & Sendhil Mullainathan, 2014. "Contract Farming and Agricultural Productivity in Western Kenya," NBER Chapters, in: African Successes: Sustainable Growth National Bureau of Economic Research, Inc.

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