Banks and Microbanks

68 Pages Posted: 6 Sep 2013

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Asli Demirgüç-Kunt

World Bank

Jonathan Morduch

New York University (NYU) - Robert F. Wagner Graduate School of Public Service; New York University (NYU) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 7, 2013

Abstract

We combine two datasets to examine whether the scale of an economy’s banking system affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks that rely on commercial-funding, use traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs), and take deposits. We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.

Suggested Citation

Cull, Robert and Demirgüç-Kunt, Asli and Morduch, Jonathan, Banks and Microbanks (February 7, 2013). NYU Wagner Research Paper No. 2232170, Available at SSRN: https://ssrn.com/abstract=2232170 or http://dx.doi.org/10.2139/ssrn.2232170

Robert Cull

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/rcull

Asli Demirgüç-Kunt

World Bank ( email )

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Washington, DC 20433
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Jonathan Morduch (Contact Author)

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

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New York University (NYU) - Department of Economics ( email )

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HOME PAGE: http://www.nyu.edu/projects/morduch

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