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Are Financial Cooperatives Crowded out by Commercial Banks in the Process of Financial Sector Development?

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  • Anaïs Périlleux
  • Annabel Vanroose
  • Bert D'Espallier

Abstract

This paper investigates whether financial cooperatives are crowded out by commercial banks in the process of financial sector development. We use a self-constructed database based on World Council of Credit Unions data for the years 1990-2011 of cooperatives in 55 developing countries. Our empirical results are threefold. First, financial cooperatives tend to reach more members in countries where the commercial banking sector is weak. This validates their role as a banking market failure solution. Second, in the process of commercial bank expansion, financial cooperatives run the risk of being crowded out. Third, the relationship is actually complex, since financial cooperatives seem to benefit from some kind of bank presence, especially as far as savings mobilization is concerned.
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  • Anaïs Périlleux & Annabel Vanroose & Bert D'Espallier, 2016. "Are Financial Cooperatives Crowded out by Commercial Banks in the Process of Financial Sector Development?," Kyklos, Wiley Blackwell, vol. 69(1), pages 108-134, February.
  • Handle: RePEc:bla:kyklos:v:69:y:2016:i:1:p:108-134
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    Cited by:

    1. Suesse, Marvin & Wolf, Nikolaus, 2020. "Rural transformation, inequality, and the origins of microfinance," Journal of Development Economics, Elsevier, vol. 143(C).
    2. Simon Cornée & Panu Kalmi & Ariane Szafarz, 2020. "The Business Model of Social Banks," Kyklos, Wiley Blackwell, vol. 73(2), pages 196-226, May.
    3. Amr Khafagy, 2018. "Regulation, supervision and deposit insurance for financial cooperatives: an empirical investigation," Annals of Finance, Springer, vol. 14(2), pages 143-193, May.
    4. Donou-Adonsou, Ficawoyi & Sylwester, Kevin, 2017. "Growth effect of banks and microfinance: Evidence from developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 44-56.
    5. Király, Júlia, 2016. "A magyar bankrendszer tulajdonosi struktúrájának átalakulása [Transformation of the ownership structure of the Hungarian banking system]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 725-761.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

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