Improving Access to Banking: Evidence from Kenya

39 Pages Posted: 20 Apr 2016

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: September 1, 2013

Abstract

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.

Keywords: Banks & Banking Reform, Access to Finance, Public Sector Corruption & Anticorruption Measures, Corporate Law, Debt Markets

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 (September 1, 2013). World Bank Policy Research Working Paper No. 6593. Available at SSRN: https://ssrn.com/abstract=2321990

Franklin Allen (Contact Author)

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

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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