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Improving access to banking : evidence from Kenya

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

Using household surveys and bank penetration data at the district-level in 2006 and 2009, this paper examines the impact of Equity Bank -- a leading private commercial bank focusing on microfinance -- on access to banking in Kenya. Unlike other commercial banks in Kenya, Equity Bank pursues distinct branching strategies that target underserved areas and less-privileged households. Equity Bank presence has a positive and significant impact on households'use of bank accounts and bank credit, especially for Kenyans with low income, no salaried job, and less education and those who do not own their own home. The findings are robust to using the district-level proportion of people speaking a minority language as an instrument for Equity Bank presence. It appears that 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 solution to the financial access problem that has hindered the development of inclusive financial sectors in many African countries.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6593.

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Date of creation: 01 Sep 2013
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Handle: RePEc:wbk:wbrwps:6593
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  1. Robin Burgess & Rohini Pande, 2004. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," The Centre for Market and Public Organisation 04/104, Department of Economics, University of Bristol, UK.
  2. Isaac Mbiti & David N. Weil, 2011. "Mobile Banking: The Impact of M-Pesa in Kenya," Working Papers 2011-13, Brown University, Department of Economics.
  3. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
  4. Brune, Lasse & Gine, Xavier & Goldberg, Jessica & Yang, Dean, 2011. "Commitments to save : a field experiment in rural Malawi," Policy Research Working Paper Series 5748, The World Bank.
  5. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Franklin Allen & Elena Carletti & Robert Cull & Jun Qian & Lemma Senbet & Patricio Valenzuela, 2012. "Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya," NBER Working Papers 18013, National Bureau of Economic Research, Inc.
  7. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
  8. 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.
  9. repec:ner:tilbur:urn:nbn:nl:ui:12-3125426 is not listed on IDEAS
  10. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," Boston College Working Papers in Economics 545, Boston College Department of Economics, revised 14 Feb 2003.
  11. George R. G. Clarke & Lixin Colin Xu & Heng-fu Zou, 2011. "Finance and Income Inequality: What Do the Data Tell Us?," CEMA Working Papers 489, China Economics and Management Academy, Central University of Finance and Economics.
  12. repec:ner:tilbur:urn:nbn:nl:ui:12-3125425 is not listed on IDEAS
  13. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2005. "Reaching out : access to and use of banking services across countries," Policy Research Working Paper Series 3754, The World Bank.
  14. Ravallion Martin, 2009. "Should the Randomistas Rule?," The Economists' Voice, De Gruyter, vol. 6(2), pages 1-5, February.
  15. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
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