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Are financial cooperatives crowded out by commercial banks in the process of financial sector development?

Author

Listed:
  • Anaïs A 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.

Suggested Citation

  • Anaïs A Périlleux & Annabel Vanroose & Bert D'Espallier, 2016. "Are financial cooperatives crowded out by commercial banks in the process of financial sector development?," ULB Institutional Repository 2013/226157, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/226157
    Note: SCOPUS: ar.j
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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. Garcia, Alexandre Schwinden & Gonzaga, André Lucas Moreira, 2024. "How credit unions affect the profitability of Brazilian commercial banks?," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 190-209.
    3. Anaïs Périlleux & Ariane Szafarz, 2022. "Women in the boardroom: a bottom–up approach to the trickle-down effect," Small Business Economics, Springer, vol. 58(4), pages 1783-1800, April.
    4. Simon Cornée & Panu Kalmi & Ariane Szafarz, 2020. "The Business Model of Social Banks," Kyklos, Wiley Blackwell, vol. 73(2), pages 196-226, May.
    5. 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.
    6. 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.
    7. Pankaj K. Maskara & Florence Neymotin, 2021. "Do Credit Unions Serve the Underserved?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(2), pages 184-205, April.
    8. 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.

    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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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