Foreign Bank Participation in Developing Countries: What Do We Know About the Drivers and Consequences of this Phenomenon?

32 Pages Posted: 20 Apr 2016

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: August 1, 2010

Abstract

Foreign bank participation has increased steadily across developing countries since the mid-1990s. This paper documents this trend and surveys the existing literature to explore the drivers and consequences of this phenomenon, paying particular attention to the differences observed across regions both in the degree of foreign bank participation and in the impact of this process. Local profit opportunities, the absence of barriers to entry, and the presence of mechanisms to mitigate information problems have been the main factors driving foreign bank entry across developing countries. In general, foreign bank participation has been shown to exert a positive influence on banking sector efficiency and competition. The weight of the evidence suggests that foreign bank presence does not endanger, but rather enhances banking sector stability. And although some case studies suggest that foreign bank entry limits access to finance, many cross-country studies offer evidence to the contrary.

Keywords: Banks & Banking Reform, Debt Markets, Access to Finance, Emerging Markets, Foreign Direct Investment

Suggested Citation

Cull, Robert and Martinez Peria, Maria Soledad, Foreign Bank Participation in Developing Countries: What Do We Know About the Drivers and Consequences of this Phenomenon? (August 1, 2010). World Bank Policy Research Working Paper No. 5398. Available at SSRN: https://ssrn.com/abstract=1656219

Robert Cull (Contact Author)

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

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-6365 (Phone)
202-522-1155 (Fax)

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

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
297
rank
99,955
Abstract Views
1,191
PlumX Metrics