Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

53 Pages Posted: 30 Apr 2008

See all articles by Robin Burgess

Robin Burgess

London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Rohini Pande

Yale University - Economic Growth Center

Multiple version iconThere are 2 versions of this paper

Date Written: August 2003

Abstract

Lack of access to finance is often cited as a key reason why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirial evidence on this issue. Between 1977 and 1990, the Indian Central Bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches. We show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse is true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output.

Suggested Citation

Burgess, Robin and Pande, Rohini, Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment (August 2003). , Vol. , pp. -, 2003. Available at SSRN: https://ssrn.com/abstract=1127009

Robin Burgess

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://econ.lse.ac.uk/staff/rburgess/index_own.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rohini Pande

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

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