Financial development and inclusion in Kenya

Abstract

In a previous feature (http://go.worldbank.org/UVL5PJQX60), we highlighted the impact of M-PESA, a mobile phone-based system for person-to-person payments and money transfers that, since its inception in 2007, has attracted over ten million customers, more than half of Kenya’s adult population. Less emphasis, however, has been given to the dramatic expansion of the Kenyan network of bank branches that took place over the same period. From 2006 to 2009, the number of bank branches increased by nearly 70%, from 576 to 970, and all types of banks (government- owned, foreign-owned, and private domestically owned) took part in the expansion. Because banks offer a wider set of financial services than the payments services offered through M-PESA (previous research has shown few M-PESA customers use their accounts to save, for example), this branch expansion could potentially produce more substantial benefits to households associated with a deeper financial inclusion.