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Resolving the African financial development gap : cross-country comparisons and a within-country study of Kenya

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

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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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6592.

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Date of creation: 01 Sep 2013
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Handle: RePEc:wbk:wbrwps:6592

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Keywords: Access to Finance; Banks&Banking Reform; Debt Markets; Emerging Markets; Economic Theory&Research;

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References

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Citations

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Cited by:
  1. 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.
  2. Henderson, Daniel J. & Papageorgiou, Chris & Parmeter, Christopher F., 2013. "Who benefits from financial development? New methods, new evidence," European Economic Review, Elsevier, vol. 63(C), pages 47-67.
  3. Thorsten Beck & Robert Cull, 2013. "Banking in Africa," CSAE Working Paper Series 2013-16, Centre for the Study of African Economies, University of Oxford.
  4. 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.
  5. 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.
  6. 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.
  7. Wamboye, Evelyn & Mookerjee, Rajen, 2013. "Financial development and manufactured exports: the african experience," MPRA Paper 46474, University Library of Munich, Germany.

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