| 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 the 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 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. 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. |