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Interregional Allocation of Funds for Financial Institutions and Its Efficiency

Author

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  • Iichiro Uesugi

    (Hitotsubashi University)

Abstract

We develop a new indicator for the interregional allocation of funds through loans and deposits by financial institutions within a country. Using information on loans and deposits held by each financial institution branch we measure the extent to which deposits move between regions to facilitate lending. We then analyze trends in the allocation of funds among regions, including cross-border lending, and examine the efficiency of these allocations. For the interregional flow of funds, deposits collected within a prefecture are most frequently used for loans in that prefecture. On the other hand, some of the deposits collected in a prefecture are used for loans in other prefectures, especially in Tokyo, and the degree of cross-border flows varies greatly from prefecture to prefecture. Recent changes indicate that deposit inflows from rural regions to Tokyo have begun to decline while the flow of funds within the same prefecture has increased. Regarding the determinants of the interregional allocation of funds there is a negative relationship between productivity and the flow of funds, with deposits to be provided as loans moving from productivity-increasing regions to productivity-decreasing regions. The cost of producing information required to lend to remote regions may be a possible cause of this inefficiency.

Suggested Citation

  • Iichiro Uesugi, 2025. "Interregional Allocation of Funds for Financial Institutions and Its Efficiency," Advances in Japanese Business and Economics,, Springer.
    • Handle: RePEc:spr:advchp:978-981-96-3193-3_4
    DOI: 10.1007/978-981-96-3193-3_4
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