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date: 07 March 2021

Abstract and Keywords

This chapter traces the evolution of the financial sector in Kenya over the last 10 years. While the rise of Equity Bank and M-Pesa—a mobile money, transfer, financing, and microfinancing service—has led to Kenya being viewed as a champion in the financial inclusion agenda, we show that the story of financial reform has been complex and at times contradictory. In the 1980s and 1990s, liberalization did not lead to the fruits expected in terms of savings and investment. More recent increases in both financial depth and financial inclusion have not led to a reduction in interest rate spreads or increased credit to key sectors of the economy. This chapter shows that debates concerning the best model of regulation of the financial sector and the key methods for regulating interest rate spreads are ongoing. The chapter also discusses the role of the banking sector in election financing, and argues that the patterns of wealth accumulation are more useful than level of liberalization of the banking in explaining the likelihood of opposition parties getting higher levels of finance for elections.

Keywords: banking, finance, development, liberalization, financial inclusion, mobile money, credit, interest rates, regulation

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