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The Social Impact of the Banking Sector in Colombia, 1995 – 2002

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  • Juan Carlos Echeverry Garzón
  • Ángela María Fonseca Galvis

Abstract

This document studies the impact of the banking sector on social variables in Colombia, and tries to identify how the difference in banking institutions’ development at the municipal levels influences economic and social prosperity of low income households and firms. One part of the literature emphasizes the role of the financial system in promoting this type of agents’ economic performance as long as it attracts them to the use of financial intermediation, making available to them the use of financial services and technologies, both in deposits and credit. Another trend in the literature studies specific characteristics of liquidity constrained agents. This study empirically identifies how bancarization influences poverty and investment on education, in the case of families; and economic performance and the number of firms, in the municipal level in Colombia for the period 1995-2002. When studying these effects we control for local variables such as public spending in investment, homicide rate and guerrilla conflict. The period of study was characterized by the end of an economic boom and recession, which influences our econometric results. This study shows that banking developments affect households’ education decisions and firms’ performance at the municipal level; it was also found that non performing loans are associated with the decrease in the number of firms, but a relationship between loans and the creation of firms was not present.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_039.

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Length: 35 pages JEL Classification:
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_039

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  1. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2002. "Does Local Financial Development Matter?," CEPR Discussion Papers 3307, C.E.P.R. Discussion Papers.
  2. Maldonado, Jorge Higinio & Gonzalez-Vega, Claudio & Romero, Vivianne, 2003. "The Influence Of Microfinance On The Education Decisions Of Rural Households: Evidence From Bolivia," 2003 Annual meeting, July 27-30, Montreal, Canada 22067, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  4. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  5. Ana María Díaz & Fabio Sánchez, 2004. "Geografía De Los Cultivos Ilícitos Y Conflicto Armado En Colombia," DOCUMENTOS CEDE 002766, UNIVERSIDAD DE LOS ANDES-CEDE.
  6. Leopoldo Fergusson, 2006. "Institutions for Financial Development: What are they and where do they come from?," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 27-70, 02.
  7. Roberto Steiner & Adolfo Barajas, 2000. "Depositor Behavior and Market Discipline in Colombia," IMF Working Papers 00/214, International Monetary Fund.
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