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Banking sector stability, efficiency, and outreach in Kenya

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  • Beck, Thorsten
  • Cull, Robert
  • Fuchs, Michael
  • Getenga, Jared
  • Gatere, Peter
  • Randa, John
  • Trandafir, Mircea

Abstract

Although Kenya's financial system is by far the largest and most developed in East Africa and its stability has improved significantly over the past years, many challenges remain. This paper assesses the stability, efficiency, and outreach of Kenya's banking system, usingaggregate, bank-level, and survey data. Banks'asset quality and liquidity positions have improved, making the system more resistant to shocks, and interest rate spreads have declined, in part due to reduction in the overhead costs of foreign banks. Outreach remains limited, but has improved in recent years, driven by mobile payments services in the domestic remittance market. Fostering a level regulatory playing field for all deposit-taking institutions is a key remaining challenge. Specifically, an effective but not overly burdensome framework for regulation and supervision of microfinance institutions and cooperatives is a priority. Maintaining an openness to new, and non-bank, providers of financial services, which has enabled the success of mobile payments, could also further outreach.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5442.

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Date of creation: 01 Oct 2010
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Handle: RePEc:wbk:wbrwps:5442

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Keywords: Banks&Banking Reform; Access to Finance; Debt Markets; Emerging Markets; Bankruptcy and Resolution of Financial Distress;

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  1. Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How foreign participation and market concentration impact bank spreads : evidence from Latin America," Policy Research Working Paper Series 3210, The World Bank.
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Cited by:
  1. Allen, Franklin & Carletti, Elena & Cull, Robert & Qian, Jun & Senbet, Lemma & Valenzuela, Patricio, 2013. "Improving access to banking : evidence from Kenya," Policy Research Working Paper Series 6593, The World Bank.
  2. Jacob Oduor & Moses Muse Sichei & Samuel Kiplangat Tiriongo & Chris Shimba, 2014. "Working Paper 202 - Segmentation and efficiency of the interbank market and their implication for the conduct of monetary policy," Working Paper Series, African Development Bank 2106, African Development Bank.
  3. Kangni Kpodar & Mihasonirina Andrianaivo, 2011. "ICT, Financial Inclusion, and Growth Evidence from African Countries," IMF Working Papers 11/73, International Monetary Fund.
  4. Thorsten Beck & Martin Brown, 2011. "Which Households Use Banks? Evidence from the Transition Economies," BCL working papers, Central Bank of Luxembourg 50, Central Bank of Luxembourg.
  5. Beck, Thorsten, 2012. "Foreign Bank Ownership and Household Credit," Working Papers on Finance 1206, University of St. Gallen, School of Finance.
  6. Beck, Thorsten & Brown, Martin, 2011. "Use of Banking Services in Emerging Markets--Household-Level Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8475, C.E.P.R. Discussion Papers.
  7. Brown, Martin & Guin, Benjamin & Kirschenmann, Karolin, 2013. "Microfinance Banks and Household Access to Finance," Working Papers on Finance 1302, University of St. Gallen, School of Finance.
  8. Beck, Thorsten & Demirguc-Kunt, Asli & Singer, Dorothe, 2011. "Is small beautiful ? financial structure, size and access to finance," Policy Research Working Paper Series 5806, The World Bank.
  9. Beck, T.H.L. & Brown, M., 2011. "Use of Banking Services in Emerging Markets -Household-Level Evidence (Replaces CentER DP 2010-092)," Discussion Paper, Tilburg University, Center for Economic Research 2011-089, Tilburg University, Center for Economic Research.
  10. Beck, T.H.L. & Brown, M., 2010. "Which Households Use Banks? Evidence from the Transition Economies (Replaced by CentER DP 2011-089)," Discussion Paper, Tilburg University, Center for Economic Research 2010-92, Tilburg University, Center for Economic Research.

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