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Is Mobile Banking Breaking the Tyranny of Distance to Bank Infrastructure? Evidence from Kenya

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  • Michael King

    () (Institute for International Integration Studies, Trinity College Dublin)

Abstract

Is the mobile banking revolution overcoming the tyranny of distance to bank infrastructure and improving financial inclusion in sub-Saharan Africa? Focusing on Kenya, this paper uses Global Positioning System (GPS) data to investigate the importance of distance and time to bank branch for personal access to both formal banking services and the mobile banking platform M-Pesa. Evidence suggests that greater distances and time to bank infrastructure reduce the likelihood an individual is formally banked and that despite the significant expansion of the bank branch network in Kenya (2006-2009), the negative relationship between distance to bank branch and the likelihood of being banked has increased. In contrast, evidence is found to support the hypothesis that mobile banking in Kenya is overcoming the tyranny of distance to bank infrastructure for the financial inclusion of all economic groups in Kenya.

Suggested Citation

  • Michael King, 2012. "Is Mobile Banking Breaking the Tyranny of Distance to Bank Infrastructure? Evidence from Kenya," The Institute for International Integration Studies Discussion Paper Series iiisdp412, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp412
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    References listed on IDEAS

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    1. Djankov, Simeon & Miranda, Pedro & Seira, Enrique & Sharma, Siddharth, 2008. "Who are the unbanked ?," Policy Research Working Paper Series 4647, The World Bank.
    2. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    3. Kenneth P. Brevoort & John D. Wolken, 2008. "Does distance matter in banking?," Finance and Economics Discussion Series 2008-34, Board of Governors of the Federal Reserve System (U.S.).
    4. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    5. Michael King, 2012. "The Unbanked Four-Fifths: Informality and Barriers to Financial Services in Nigeria," The Institute for International Integration Studies Discussion Paper Series iiisdp411, IIIS.
    6. Allen Berger & Robert DeYoung, 2001. "The Effects of Geographic Expansion on Bank Efficiency," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(2), pages 163-184, April.
    7. Jenny C. Aker & Isaac M. Mbiti, 2010. "Mobile Phones and Economic Development in Africa," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 207-232, Summer.
    8. Isaac Mbiti & David N. Weil, 2015. "Mobile Banking: The Impact of M-Pesa in Kenya," NBER Chapters,in: African Successes, Volume III: Modernization and Development, pages 247-293 National Bureau of Economic Research, Inc.
    9. World Bank, 2008. "Finance for All? Policies and Pitfalls in Expanding Access," World Bank Publications, The World Bank, number 6905.
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    Cited by:

    1. Michael King, 2012. "The Unbanked Four-Fifths: Informality and Barriers to Financial Services in Nigeria," The Institute for International Integration Studies Discussion Paper Series iiisdp411, IIIS.

    More about this item

    Keywords

    Access to finance; barriers to banking services; mobile banking; M-Pesa; Kenya; distance; financial inclusion;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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