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Banking sector stability, efficiency, and outreach in Kenya

Author

Listed:
  • 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.

Suggested Citation

  • Beck, Thorsten & Cull, Robert & Fuchs, Michael & Getenga, Jared & Gatere, Peter & Randa, John & Trandafir, Mircea, 2010. "Banking sector stability, efficiency, and outreach in Kenya," Policy Research Working Paper Series 5442, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5442
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Martin Brown & Benjamin Guin & Karolin Kirschenmann, 2016. "Microfinance Banks and Financial Inclusion," Review of Finance, European Finance Association, vol. 20(3), pages 907-946.
    2. Beck, Thorsten & Demirgüç-Kunt, Asli & Singer, Dorothe, 2013. "Is Small Beautiful? Financial Structure, Size and Access to Finance," World Development, Elsevier, vol. 52(C), pages 19-33.
    3. Brown, Martin & Beck, Thorsten, 2011. "Use of Banking Services in Emerging Markets--Household-Level Evidence," CEPR Discussion Papers 8475, C.E.P.R. Discussion Papers.
    4. Franklin Allen & Elena Carletti & Robert Cull & Jun QJ Qian & Lemma Senbet & Patricio Valenzuela, 2021. "Improving Access to Banking: Evidence from Kenya [A matter of experience? Understanding the decline in group lending]," Review of Finance, European Finance Association, vol. 25(2), pages 403-447.
    5. Florian Leon, 2015. "What do we know about the role of bank competition in Africa?," CERDI Working papers halshs-01164864, HAL.
    6. Stephene Maende & Joseph Mutana & Michael Munga, 2018. "Analyzing High Interest Rate Spreads in Kenya: Panel Data Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(7), pages 312-327, July.
    7. Noor Ulain Rizvi & Smita Kashiramka & Shveta Singh, 2018. "Basel I to Basel III: Impact of Credit Risk and Interest Rate Risk of Banks in India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1_suppl), pages 83-111, April.
    8. Kodongo, Odongo & Natto, Dinah & Biekpe, Nicholas, 2015. "Explaining cross-border bank expansion in East Africa," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 71-84.
    9. Odunayo Magret Olarewaju, 2020. "Investigating the factors affecting nonperforming loans in commercial banks: The case of African lower middle‐income countries," African Development Review, African Development Bank, vol. 32(4), pages 744-757, December.
    10. Beck, Thorsten & Brown, Martin, 2011. "Which households use banks? Evidence from the transition economies," Working Paper Series 1295, European Central Bank.
    11. Beck, Thorsten & Brown, Martin, 2015. "Foreign bank ownership and household credit," Journal of Financial Intermediation, Elsevier, vol. 24(4), pages 466-486.
    12. Fanta Ashenafi Beyene & Makina Daniel, 2016. "The Finance Growth Link: Comparative Analysis of Two Eastern African Countries," Comparative Economic Research, Sciendo, vol. 19(3), pages 147-167, September.
    13. Singer, D.E.M., 2013. "The role of institutions in international finance," Other publications TiSEM 28cd8e4c-3d06-499a-b37b-a, Tilburg University, School of Economics and Management.
    14. 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 2106, African Development Bank.
    15. Mushtaq, Rizwan & Bruneau, Catherine, 2019. "Microfinance, financial inclusion and ICT: Implications for poverty and inequality," Technology in Society, Elsevier, vol. 59(C).
    16. Beck, T.H.L. & Brown, M., 2011. "Use of Banking Services in Emerging Markets -Household-Level Evidence (Replaces CentER DP 2010-092)," Discussion Paper 2011-089, Tilburg University, Center for Economic Research.
    17. Mr. Kangni R Kpodar & Mihasonirina Andrianaivo, 2011. "ICT, Financial Inclusion, and Growth: Evidence from African Countries," IMF Working Papers 2011/073, International Monetary Fund.
    18. Beck, T.H.L. & Brown, M., 2011. "Use of Banking Services in Emerging Markets -Household-Level Evidence (Replaces EBC DP 2010-025)," Other publications TiSEM 9bb7dc9a-700a-42db-97f1-d, Tilburg University, School of Economics and Management.
    19. 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.

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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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