Foreign bank participation in developing countries: what do we know about the drivers and consequences of this phenomenon?

Robert Cull and Maria Martinez Peria

No 5398, Policy Research Working Paper Series from The World Bank

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 (search for similar items in EconPapers)
Date: 2010-08-01
New Economics Papers: this item is included in nep-ban and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5398

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