The Likelihood of Financial Inclusion in e-Banking: A BiProbit Sample-Selection Modeling Approach

Abstract

There is a plethora of studies on financial exclusion of the poor, mostly in developing countries. A related but unanswered question is, whether the likelihood of e-banking inclusion and its determinants are similar for the banked and the unbanked. The distinction is important for both the corporate sector and policy makers to answer the question of whether the drivers of e-banking adoption are limited to technological progress. The objective of this paper is to model the likelihood of the banked in a traditional fiat money system (f-banking) to be e-banking included. The Bivariate Probit Sample Selection model is applied with a recent data set from the Kenya Financial Access Household Survey 2015. The results show that there is ninety two percent likelihood of the f-banked to be e-banked. By contrast, the results also show that the absolute financially excluded have seventy six percent probability of being e-banking included. Economic intuition supported by empirical analysis reveals that for an average financially excluded person, it is as a result of persevering over past hardship to be finally e-banking included. The results raise a call to policy makers that the easiness of the f-banked to enter the e-banking market may soon result in e-banking cost sky-rocketing to the detriment of the absolute financially excluded, who have so laboriously tested the e-banking market in the presence of uninsured and unhedged eminent risk.