Structural Issues in the Kenyan Financial System: Improving Competition and Access

Although by regional standards, Kenya's financial system is relatively well developed and diversified, major structural impediments prevent it from reaching its full potential. Crosscountry comparisons, however, show the importance of a well-developed financial sector for long-term economic growth and poverty alleviation. Experience from other developing economies has shown the detrimental effect of government ownership and the positive impact that foreign bank ownership can have on the development of a market-based financial system. Analyzing and decomposing the high interest rate spreads and margins in Kenya helps identify structural impediments that drive the high cost of and low access to financial services. The limited information sharing on debtors, deficiencies in the legal and judicial system, the limited number of strong and reputable banks and non-transparency and uncertainty in the banking market are major impediments to the development of Kenya's financial system, to reducing spreads and to widening access.

Bibliographic Details

Main Authors:	Fuchs, Michael, Beck, Thorsten
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-07
Subjects:	ACCOUNTABILITY, ACCOUNTING, ADVERSE CONSEQUENCES, ADVERSE SELECTION, AUTONOMY, BANK PRIVATIZATION, BANK SIZE, BANK SUPERVISION, BANKING CRISIS, BANKING INDUSTRY, BANKING SECTOR, BANKING SYSTEM, BANKING SYSTEMS, BANKS, CAPITAL ACCUMULATION, CAPITAL INFLOWS, CAPITAL MARKETS, CENTRAL BANK, COMMERCIAL BANKS, COMPETITIVENESS, CONSOLIDATION, CONSUMER PROTECTION, CONTAGION, CONTRACT ENFORCEMENT, COUNTRY COMPARISON, COUNTRY COMPARISONS, CPI, CREDIT RATIONING, CREDIT RISK, CROWDING OUT, DEBT, DEPOSITORS, DEPOSITS, DEVELOPED COUNTRIES, EARNING ASSETS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMICS, EMERGING MARKETS, EMPIRICAL EVIDENCE, ENABLING ENVIRONMENT, FINANCIAL CONTRACTS, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIARIES, FINANCIAL INTERMEDIARY DEVELOPMENT, FINANCIAL INTERMEDIATION, FINANCIAL MARKETS, FINANCIAL POLICIES, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL STRUCTURE, FINANCIAL SYSTEMS, FOREIGN BANKS, FRAUD, GDP, GDP PER CAPITA, GOVERNMENT POLICIES, GROWTH, INCOME, INFLATION, INSTITUTIONAL ENVIRONMENT, INSTITUTIONAL REFORM, INSURANCE, INTEREST MARGIN, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANKS, INTERNATIONAL TRADE, LEGAL FRAMEWORK, LEGAL PROVISIONS, LEGISLATION, LENDING RATES, LIQUIDITY, LOAN LOSS PROVISIONS, LOOTING, MANDATES, MARKET DISCIPLINE, MICROFINANCE, MORAL HAZARD, MORTGAGES, NET INTEREST MARGIN, OVERHEAD COSTS, OWNERSHIP STRUCTURE, PARTIAL PRIVATIZATION, POLICY, POLICY ENVIRONMENT, POLICY MAKERS, POLITICAL INTERFERENCE, PORTFOLIOS, POVERTY ALLEVIATION, PRIVATE BANKS, PRIVATIZATION, PRODUCTIVITY, PROFIT MARGIN, PROFIT MARGINS, PROFITABILITY, PUBLIC POLICY, RECAPITALIZATION, RESERVE REQUIREMENTS, RESOURCE ALLOCATION, RETURN ON ASSETS, SAVINGS, SHAREHOLDERS, SMALL BANKS, SUPERVISORY FRAMEWORK, TERMS OF TRADE, TRANSPARENCY, VALUE OF MONEY, VOLATILITY, VULNERABILITY FINANCIAL SYSTEM, FINANCIAL SECTOR DEVELOPMENT, GOVERNANCE, OWNERSHIP, INCOME GROWTH, GROSS DOMESTIC PRODUCT PER CAPITA,
Online Access:	http://documents.worldbank.org/curated/en/2004/07/4986852/structural-issues-kenyan-financial-system-improving-competition-access https://hdl.handle.net/10986/14185
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