Fighting competition from Mobile Network Operators in the banking sector: The case of Kenya

Résumé

This paper studies how Mobile Network Operator (MNO) impacts traditional banks’ coverage decision in a model of vertical and horizontal differentiation with asymmetric transportation costs. The competitive pressure triggered by MNOs entry on traditional banking sector leads to prices decrease and broadens financial inclusion as the traditional banking sector expands its network in response to the entry of MNOs. The model’s predictions are checked against data from Kenya, where mobile banking has been most successful. Results from the econometric model for the period 2000-2011, suggest that, roughly, for each 7 new mobile agents in a sub-locality, one new bank branch opened.

Mots-clés

Financial inclusion; Regulation; Mobile banking; Development;

Codes JEL

G18: Government Policy and Regulation
L51: Economics of Regulation
L88: Government Policy
L96: Telecommunications
O16: Financial Markets • Saving and Capital Investment • Corporate Finance and Governance