Digital finance and bank power in Kenya (with R. Upadhyaya)
This paper examines how the rise of fintech has shaped the power of banks in Kenya. As in other parts of the world, fintech seemed to present a serious challenge to banks’ business model and indeed the very power of banks in Kenya. When fintech was first rising in the aftermath of the Global Financial Crisis, banks faced the choice between embracing their arrival and engaging with these new competitors through collaboration or eschewing the change by either trying to suppress the rise of digital banking or by fighting these new actors and adopting their business models to reduce the competitive challenge. We employ an in-depth case study of banking in Kenya because it is the sub-Saharan African lower income- country where digitalization has seen the greatest advances and the state has supported the expansion of fintech. Based on the case study, we show how banks embraced fintech and used their emergence to expand their regional outreach and to cement their power in banking and politics. More specifically, we show how banks and their allies managed to augment the basis of banks’ power, highlighting not only the continued structural and infrastructural power banks but also power arising from the central role banks have come to play in supporting Kenya’s digital sovereignty. As such the paper not only makes an empirical contribution by studying how banking meet digitalization in a lower income economic context, which has received little attention in the literature that is focused on core countries, but also contributes to broader theoretical discussions about the changing power of banks in the digital era.
Local Currency Bond Markets in Africa: Resilience and Subordination (with A. Kaltenbrunner, I. Kvangraven and I. Weigandi)
Local currency bond market (LCBM) development has long been hailed as an essential strategy to prevent future debt crises in developing countries. LCBMs were seen as a technical fix to many of the risks associated with external borrowing or, more specifically, borrowing in foreign currency such as debt crises arising from currency mismatches and exchange rate depreciation. While this view has become dominant in IFIs and many donor institutions, there has been surprisingly little empirical examination of whether and to what extent LCBMs actually hold these promises in the context of countries that are located at the lower end of global economic and financial hierarchies. What are the costs and benefits of LCBM development in these subordinated contexts? Can LCBMs provide development space for such countries? This paper tries to answer these questions, drawing on the experiences of a set of African countries, including Angola, Egypt, Ghana, Kenya, Nigeria, South Africa and Uganda. These countries' subordinate integration into international financial markets, their international financial subordination (IFS), might fundamentally shape the nature and consequences of LCBM development. This paper fills this gap by providing a mixed-method study of selected LCBMs in Africa. It contributes to an emerging literature on international financial subordination, and contributes to filling a gap in research on local bond markets in Africa which has not systematically analyzed the role played by economic and political dependencies.
Employing capital: Patient capital and labour relations in Kenya’s manufacturing sector (with R. Upadhyaya).
In discussions about how finance can better serve society, one type of financing that gained traction is patient capital (PC). While PC is a central concept in comparative political economy (CPE), the literature has focused on advanced economies, and we still know little about the conditions under which PC leads to positive outcomes. We develop a conceptualization of PC in developing and emerging economies (DEEs), and use interview data from Kenya to examine who provides PC and under what conditions PC leads to improvements in employment relations. We find that the landscape of PC in DEEs differs from the one in advanced economies and that institutions determine the extent to which capital is patient and has a positive impact. Our paper contributes to filling a gap in the CPE literature regarding PC in DEEs and speaks to broader debates about how to enhance the contribution of finance to society.