Improving Access to Banking: Evidence from Kenya

38 Pages Posted: 17 Jul 2012

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Elena Carletti

Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Robert Cull

World Bank - Development Research Group (DECRG)

Jun Qian

Fanhai International School of Finance, Fudan University; University of Pennsylvania - Wharton Financial Institutions Center

Lemma W. Senbet

University of Maryland - Robert H. Smith School of Business

Patricio Valenzuela

University of Chile

Multiple version iconThere are 4 versions of this paper

Date Written: July 10, 2012

Abstract

Using household surveys and bank penetration data at the district-level in 2006 and 2009, we explore the impact of Equity Bank — a leading private commercial bank focusing on microfinance on the access to banking in Kenya. Equity Bank pursues distinct branching and business strategies that target underserved areas and less privileged households, unlike other commercial banks in Kenya. 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 that 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. We conclude 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.

Keywords: Equity Bank, bank penetration, bank account, minority language, microfinance

JEL Classification: G2, O1, R2

Suggested Citation

Allen, Franklin and Carletti, Elena and Cull, Robert and Qian, Jun and Senbet, Lemma W. and Valenzuela, Patricio, Improving Access to Banking: Evidence from Kenya (July 10, 2012). Available at SSRN: https://ssrn.com/abstract=2109492 or http://dx.doi.org/10.2139/ssrn.2109492

Franklin Allen

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Elena Carletti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Robert Cull

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-6365 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/rcull

Jun Qian (Contact Author)

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States

HOME PAGE: http://fic.wharton.upenn.edu/fic/

Lemma W. Senbet

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-2242 (Phone)
301-405-0359 (Fax)

Patricio Valenzuela

University of Chile ( email )

Republica 701 Santiago
Chile

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