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

Limited accessibility to banking services can have serious negative impact on the lives of the people. Lack of a bank account makes it hard for people to have savings that will help them respond to emergencies such as sicknesses (Dupas et al. 2014). When people lack money that would help meet their emergencies, they end up spending the resources that will benefit them in the future. Lack of accessibility to basic banking services makes it hard for people to save money that will allow them to get loans to developing themselves.

A majority of persons who live in rural Africa lack bank accounts. Lack of a secure place to keep money makes it very difficult for people to benefit from high-return investments. In the Western part of the county, bank branches are established in major towns. The establishments of banks in cities leave rural areas with limited choices. Many villagers have two options if they are to bank their money: a “Village Bank” that is owned in terms of shareholding by villagers and partial service branch of a commercial bank (Dupas et al. 2014). The two banks have large minimum balance conditions and withdrawal fees.

In addition, the Village Banks have an opening amount. A majority of village banks and commercial banks pay little or do not pay at all interest on deposits since they are in small amounts. Although the Village Banks and the Commercial Banks may offer credit, terms of borrowing from the two banks vary. The Village Bank needs people who are in groups. People must be in groups of at least 5 in order for loans to be approved. In order to get a loan, borrowers are required to purchase some shares in the bank (Dupas et al. 2014). The group that has bought shares will be qualified to borrow not exceeding four times the value of shares they own at some interest depending on their agreement.

These Commercial Banks grant loans to businesses