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Does a Bigger Commercial Banking Sector Benefit the Poor_ A Minor Field Study in Kenya

Fromell, Hanna LU (2012) In Minor Field Study Series NEKM01 20121
Department of Economics
Abstract
Recent evidence suggests that there are serious information asymmetries in the Kenyan
financial market. Between 2006 and 2009, the formal and semi-formal financial sectors in
Kenya increased a lot. In contrast to what classic economic theories would predict, the
informal financial sector experienced a minor increase. This thesis, through interviews in a
minor field study, suggests that the informal financial institutions in Kenya have some
important advantages compared to the formal ones. Informal lending seems to be operating
within informal institutions that serve as enforcement mechanisms of informal agreements.
Third party enforcement represented by the police or auctioneers is available to informal
lending, which, it may be... (More)
Recent evidence suggests that there are serious information asymmetries in the Kenyan
financial market. Between 2006 and 2009, the formal and semi-formal financial sectors in
Kenya increased a lot. In contrast to what classic economic theories would predict, the
informal financial sector experienced a minor increase. This thesis, through interviews in a
minor field study, suggests that the informal financial institutions in Kenya have some
important advantages compared to the formal ones. Informal lending seems to be operating
within informal institutions that serve as enforcement mechanisms of informal agreements.
Third party enforcement represented by the police or auctioneers is available to informal
lending, which, it may be argued, partly explains the seemingly high repayment ratios in the
informal financial sector. Many of the interviewed preferred the informal financial sector
because it offers more flexibility in the repayment period of a loan and because the costs of
financial services provided by banks were more unpredictable than the informal alternatives. (Less)
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author
Fromell, Hanna LU
supervisor
organization
course
NEKM01 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
imperfect information, loans, institutions, informal, enforcement, Kenya
publication/series
Minor Field Study Series
report number
216
ISSN
0283-1589
language
English
id
2367769
date added to LUP
2012-03-02 09:17:54
date last changed
2012-03-02 09:17:54
@misc{2367769,
  abstract     = {Recent evidence suggests that there are serious information asymmetries in the Kenyan
financial market. Between 2006 and 2009, the formal and semi-formal financial sectors in
Kenya increased a lot. In contrast to what classic economic theories would predict, the
informal financial sector experienced a minor increase. This thesis, through interviews in a
minor field study, suggests that the informal financial institutions in Kenya have some
important advantages compared to the formal ones. Informal lending seems to be operating
within informal institutions that serve as enforcement mechanisms of informal agreements.
Third party enforcement represented by the police or auctioneers is available to informal
lending, which, it may be argued, partly explains the seemingly high repayment ratios in the
informal financial sector. Many of the interviewed preferred the informal financial sector
because it offers more flexibility in the repayment period of a loan and because the costs of
financial services provided by banks were more unpredictable than the informal alternatives.},
  author       = {Fromell, Hanna},
  issn         = {0283-1589},
  keyword      = {imperfect information,loans,institutions,informal,enforcement,Kenya},
  language     = {eng},
  note         = {Student Paper},
  series       = {Minor Field Study Series},
  title        = {Does a Bigger Commercial Banking Sector Benefit the Poor_ A Minor Field Study in Kenya},
  year         = {2012},
}