NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province

Pascaline Dupas, Sarah Green, Anthony Keats, Jonathan Robinson

Chapter in NBER book African Successes, Volume III: Modernization and Development (2016), Sebastian Edwards, Simon Johnson, and David N. Weil, editors (p. 63 - 101)
Published in September 2016 by University of Chicago Press
© 2016 by the National Bureau of Economic Research
in Research on Africa

Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it. Survey evidence suggests that the main reasons people did not begin saving in their bank accounts are that: (1) they do not trust the bank, (2) service is unreliable, and (3) withdrawal fees are prohibitively expensive. In the second part of the experiment, we provided information on local credit options and lowered the eligibility requirements for an initial small loan. Within the following 6 months, only 3% of people initiated the loan application process. Survey evidence suggests that people do not borrow because they do not want to risk losing their collateral. These results suggest that, while simply expanding access to banking services (for instance by lowering account opening fees) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved. There are also challenges on the demand side, however. More work needs to be done to understand what savings and credit products are best suited for the majority of rural households.

This chapter is no longer available for free download, since the book has been published. To obtain a copy, you must buy the book.
Order from Amazon.com

Machine-readable bibliographic record - MARC, RIS, BibTeX

This chapter first appeared as NBER working paper w17851, Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province, Pascaline Dupas, Sarah Green, Anthony Keats, Jonathan Robinson
Users who downloaded this chapter also downloaded these:
Mbiti and Weil w17129 Mobile Banking: The Impact of M-Pesa in Kenya
Jack and Suri w16721 Mobile Money: The Economics of M-PESA
Dupas, Green, Keats, and Robinson w17851 Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province
Mbiti and Weil Mobile Banking: The Impact of M-Pesa in Kenya
Dupas and Robinson w14693 Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us