Are Financial Cooperatives Crowded Out by Commercial Banks in the Process of Financial Sector Development?

27 Pages Posted: 26 Jan 2016

See all articles by Anaïs Périlleux

Anaïs Périlleux

Catholic University of Louvain (UCL)

Annabel Vanroose

Université Libre de Bruxelles (ULB) - CERMi (Centre for European Research in Microfinance)

Bert D'Espallier

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: February 2016

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

Périlleux, Anaïs and Vanroose, Annabel and D'Espallier, Bert, Are Financial Cooperatives Crowded Out by Commercial Banks in the Process of Financial Sector Development? (February 2016). Kyklos, Vol. 69, Issue 1, pp. 108-134, 2016. Available at SSRN: https://ssrn.com/abstract=2722276 or http://dx.doi.org/10.1111/kykl.12105

Anaïs Périlleux (Contact Author)

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Annabel Vanroose

Université Libre de Bruxelles (ULB) - CERMi (Centre for European Research in Microfinance) ( email )

Campus du Solbosch
Avenue F.D. Roosevelt 21 - CP145/1
B-1050 Brussels
Belgium

Bert D'Espallier

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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