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Social trust and use of banking services across households in 28 transitional countries

  • Afandi, Elvin
  • Habibov, Nazim

In this paper, we use survey data from a sample of 29,000 households from 28 transitional countries and Turkey to address two main questions: (i) is there any effect of social trust on the use of banking services and (ii) what are the household-level and country-specific determinants of using banking services in transitional countries. We found that the higher level of trust in people predicts a greater level in use of banking services by households regardless of the model specifications and econometric adjustments employed. This association appears to be more prominent among less educated respondents and in countries with low levels of legal enforcement. The results also suggest that location, income and wealth of households, along with country income level, legal enforcement and inflation rates strongly affect the decisions made by households regarding their use of banking services. In contrast, we found either a very small or non-significant impact with regard to bank ownership structure on the use of banking services across households.

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File URL: http://mpra.ub.uni-muenchen.de/46997/1/MPRA_paper_46997.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46997.

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Date of creation: 02 Aug 2012
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Handle: RePEc:pra:mprapa:46997
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  1. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  2. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  3. repec:cup:cbooks:9780521805254 is not listed on IDEAS
  4. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages F52-F84, 02.
  5. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
  6. van Bastelaer, Thierry & Leathers, Howard, 2006. "Trust in Lending: Social Capital and Joint Liability Seed Loans in Southern Zambia," World Development, Elsevier, vol. 34(10), pages 1788-1807, October.
  7. Karen Smith Conway & Andrea Kutinova, 2006. "Maternal health: does prenatal care make a difference?," Health Economics, John Wiley & Sons, Ltd., vol. 15(5), pages 461-488.
  8. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
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