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Microfinance Banks and Household Access to Finance

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Author Info

  • Brown, Martin

    ()

  • Guin, Benjamin

    ()

  • Kirschenmann, Karolin

    ()

Abstract

We examine how the expansion of the branch network of a microfinance bank between 2006 and 2010 in South-East Europe has affected the use of bank accounts by households in the region. Our analysis is based on survey data reporting the use of bank accounts, socioeconomic characteristics and geographic location of 8,000 households in four countries. We geocode the location of each household and match this data with branch location information for the major microfinance bank in the region, ProCredit Bank, as well as for a large retail bank in each country. We report three key results: First, in locations where ProCredit opened a new branch between 2006 and 2010 the share of households with a bank account increased more than in locations where it did not open a new branch. Second, a new ProCredit branch leads to a stronger increase in the use of bank accounts among low- and middle-income households than among high-income households. Third, we find that ProCredit not only opens branches in areas with high economic activity, but also in areas where average household incomes are low. Overall our results suggest that microfinance banks do expand the frontier of finance as compared to ordinary retail banks.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1302.pdf
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Bibliographic Info

Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1302.

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Length: 44 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:usg:sfwpfi:2013:02

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Related research

Keywords: Access to finance; Microfinance; Bank-ownership; Mission drift.;

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References

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  1. Claeys, Sophie & Hainz, Christa, 2006. "Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates," Working Paper Series 0653, European Central Bank.
  2. Mersland, Roy & Strøm, R. Øystein, 2010. "Microfinance Mission Drift?," World Development, Elsevier, vol. 38(1), pages 28-36, January.
  3. Casey B. Mulligan & Xavier Sala-i-Martin, 2000. "Extensive Margins and the Demand for Money at Low Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 961-991, October.
  4. Beck, Thorsten & Cull, Robert & Fuchs, Michael & Getenga, Jared & Gatere, Peter & Randa, John & Trandafir, Mircea, 2010. "Banking sector stability, efficiency, and outreach in Kenya," Policy Research Working Paper Series 5442, The World Bank.
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  6. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2007. "Reaching out: Access to and use of banking services across countries," Journal of Financial Economics, Elsevier, vol. 85(1), pages 234-266, July.
  7. Vernon Henderson & Adam Storeygard & David N. Weil, 2011. "A Bright Idea for Measuring Economic Growth," American Economic Review, American Economic Association, vol. 101(3), pages 194-99, May.
  8. Grosjean, Pauline, 2011. "The institutional legacy of the Ottoman Empire: Islamic rule and financial development in South Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 1-16, March.
  9. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series 3827, The World Bank.
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Cited by:
  1. Brown, Martin, 2013. "The transmission of banking crises to households : lessons from the 2008-2011 crises in the ECA region," Policy Research Working Paper Series 6528, The World Bank.
  2. Thorsten Beck & Robert Cull, 2013. "Banking in Africa," CSAE Working Paper Series 2013-16, Centre for the Study of African Economies, University of Oxford.

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