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Bank Concentration, Competition, and Financial Inclusion

Ann Owen () and Javier Pereira ()

MPRA Paper from University Library of Munich, Germany

Abstract: Expanding access to financial services holds the promise to help reduce poverty and foster economic development. However, little is still known about the determinants of the outreach of financial systems across countries. Our study is the first attempt to employ a large panel of countries, several indicators of financial inclusion and a comprehensive set of bank competition measures to study the role of banking system structure as a determinant of cross-country variability in financial outreach for households. We use panel data from 83 countries over a 10-year period to estimate models with both country and time fixed effects. We find that greater banking industry concentration is associated with more access to deposit accounts and loans, provided that the market power of banks is limited. We find evidence that countries in which regulations allow banks to engage in a broader scope of activities are also characterized by greater financial inclusion. Our results are robust to changes in sample, data, and estimation strategy and suggest that the degree of competition is an important aspect of inclusive financial sectors.

Keywords: financial inclusion; bank concentration; market power (search for similar items in EconPapers)
JEL-codes: G21 L11 O16 (search for similar items in EconPapers)
Date: 2016-09-08
New Economics Papers: this item is included in nep-ban, nep-com, nep-ind, nep-pay and nep-sog
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