in the 21st Century

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100 Kenya’s Financial Transformation in the 21st Century 7 Conclusions This chapter contributes to the literature on financial inclusion in developing countries along two main dimensions. First, we use GPS coordinates to map the locations of 6,447 individuals and 60,692 financial services providers in Kenya to explore in detail the geography of financial access points operating in the country. Second, we exploit these locations to achieve new insights on the outreach strategies of the main formalised financial services providers in the country (namely, commercial bank branches, microfinance institutions, mobile money agents, SACCOs, bank agents and ATMs), and to understand how these strategies relate to the socio-economic characteristics and the levels of financial inclusion of the Kenyan population. In line with existing evidence (e.g. Johnson et al., 2012), we find that mobile money financial services providers and bank agents target the most underserved segments of the population, which are also the poorest and the most vulnerable. We also find that a non-negligible share of mobile money agents are located far from banks – 20% of them operate more than 10km from a commercial bank branch. At the same time, we show that more than 40% of mobile money agents are located in proximity of a primary road. This suggests that greater efforts need to be made to enable these agents to penetrate into more rural communities. Our analysis also looks at the role of SACCOs and MFIs in promoting financial inclusion. These two categories, whose numbers of units in the country are far lower than mobile money and bank agents, also target underserved populations, although within wealthier and more financially included counties. We also relate the geographical position of financial services providers across the country to the FinAccess survey respondents’ places of residency. We find that the proximity to financial services providers relates not only to the type of financial products individuals have access to, but also to their income and wealth. Our results indeed highlight the positive relationship between proximity to any formalised financial services provider and the population’s income, wealth and level of financial access. This suggests that individuals who live at a great distance from any financial services provider display very low levels of income, of wealth and of financial access. We then narrow our focus to the ownership of commercial bank branches and ATMs, and study how proximity to foreign-, domestic- or governmentowned banks relates to individuals’ levels of financial inclusion. We find that compared to other bank segments, large privately owned banks are more likely to be the closest financial services provider to less financially included people,
The Geography of Financial Services Providers in Kenya 101 though this result is significant only when we compare ATMs of large privately owned banks with ATMs of foreign-owned banks. Our findings are in line with Upadhyaya and Johnson’s analysis of the evolution of the Kenyan banking sector, and support the view that large privately owned banks are increasingly targeting poor, financially excluded populations. All in all, our results highlight the fundamental role played by mobile money agents in enhancing financial access in Kenya, which we measure as the type of financial services individuals have access to. Interestingly, we do not find the same effect when we look at rates of credit usage, which suggests that other financial services providers – like MFIs and SACCOs – are more likely to target poor populations in terms of credit products. At the same time, when we consider banks only, our findings suggest that large privately owned banks represent the bank segment that is making the greatest effort to fight financial exclusion in Kenya, particularly among poorer, more underserved populations. Yet, the analysis of the geography of financial services providers in Kenya also points to a need for much greater effort by institutions to fully target financially excluded populations. This is particularly important for those living in areas characterised by low population densities, and where the lack of infrastructure makes the penetration of financial services providers extremely difficult. References Allen, F., E. Carletti, R. Cull, J. Qian, L. Senbet and P. Valenzuela (2013), “Improving access to banking – Evidence from Kenya” World Bank Policy Research Working Paper No. 6593, Washington, DC. Jack, W. and T. Suri (2014), “Risk Sharing and Transactions Costs: Evidence from Kenya’s Mobile Money Revolution”, The American Economic Review 104(1), pp. 183–223. Johnson, S., G. Brown, and C. Fouillet (2012), The Search for Inclusion in Kenya’s Financial Landscape: The Rift Revealed, Nairobi: FSD Kenya. King, M. (2012) “Is Mobile Banking Breaking the Tyranny of Distance to Bank Infrastructure? Evidence from Kenya”, IIIS Working Paper No. 412, Dublin. Nielsen, K.B. and T. Slind (2013), “The power of mapping financial services data”, Bill & Melinda Gates Foundation, Seattle, WA.
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Kenya’s Financial Transformation
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FSD Kenya 5th floor, KMA Centre Cor
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Dedication Ravi Ramrattan was FSD
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CHAPTER 1 Transformation of Kenya
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The Digitisation of Financial Servi
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CHAPTER 6 Measurement of Financial
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CHAPTER 7 Financial Capability and
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