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

  • Michael King

    ()

    (Institute for International Integration Studies, Trinity College Dublin)

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.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp412.

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Length: 52 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iis:dispap:iiisdp412
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  1. Isaac Mbiti & David N. Weil, 2011. "Mobile Banking: The Impact of M-Pesa in Kenya," NBER Working Papers 17129, National Bureau of Economic Research, Inc.
  2. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  3. Allen N. Berger & Robert DeYoung, 2000. "The effects of geographic expansion on bank efficiency," Working Paper Series WP-00-14, Federal Reserve Bank of Chicago.
  4. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, 02.
  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. Djankov, Simeon & Miranda, Pedro & Seira, Enrique & Sharma, Siddharth, 2008. "Who are the unbanked ?," Policy Research Working Paper Series 4647, The World Bank.
  7. Jenny Aker and Isaac M. Mbiti, 2010. "Mobile Phones and Economic Development in Africa," Working Papers 211, Center for Global Development.
  8. World Bank, 2008. "Finance for All? Policies and Pitfalls in Expanding Access," World Bank Publications, The World Bank, number 6905.
  9. 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.).
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