Corporate Governance and Access to Finance - ESBG

nnEstablishing a direct and causal relationship between CorporateGovernance and Access to Finance is not straightforward, even though acorrelation between both seems to exist. A number of other factorsexplaining savings banks’ outreach also need to be taken into account.The degree of financial development of the market in which savingsbanks operate, the financial system infrastructure or the macro -economic environment are part of those key elements. Others, such asthe degree of competition in the financial sector, the types ofintermediaries, and the range of products and services they offer(as well as their main features and cost) do also condition the successof savings banks’ Access to Finance efforts.The statistical analysis suggests a positive correlation betweenCorporate Governance and Access to Finance both at the country level(chart A) and at the individual institutions’ level (chart B).• Chart A: combining indicators from previous studies 1 with our owndatabase, Corporate Governance seems to be correlated withAccess to Finance at the country level. Furthermore, when thecountry has a good Corporate Governance framework and WSBImembers have a higher market share in the country (shown by thesize of the dots), financial outreach tends also to be higher.• Chart B: Access to Finance indicators for individual WSBI memberswere also calculated, based on references traditionally used in theliterature: average deposit size, average loan size and deposits per1,000 adults. When comparing these indicators with a CorporateGovernance index defined for the purpose of this study, we foundthat, in the case of developing countries, there is a correlationbetween the quality of Corporate Governance and the three Accessto Finance indicators, stronger and more reliable in the case of theaverage deposit size.1 See section 5 for references.12