Microfinance Banks and Household Access to Finance

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country-wide retail bank for which bank branch location data is publicly available. 3Appendix 1 provides information on the ProCredit and retail banks.We hand-collect the 2006 and 2010 branch location information for ProCredit bank and theretail banks from the bank websites. Then we specify the exact location in terms of thelatitude and longitude of each branch and PSU using Google maps. Appendix 2 offers acartographical overview of the locations of PSUs, ProCredit branches and retail bankbranches by country in 2006 and 2010.[Insert Table 2 here]Table 2 provides the definitions and sources of all variables used in our analysis. We dropall observations with missing income information so that our final sample consists of 3,992observations in 2006 and 4,266 observations in 2010. The dependent variable in all ourempirical analyses is Account which indicates whether any member of the household has abank account. Table 3 shows that in each of the four countries the average use of bankaccounts increased strongly between 2006 and 2010. The increase is largest in Macedonia andAlbania where the share of households with account rose by 38 and 26 percentage pointsrespectively. The increase in Bulgaria (12 percentage points) and Serbia (14 percentagepoints) is also substantial.[Insert Table 3 here]Table 3 shows that the surge in bank accounts in the region coincides with the expansionof the branch networks of both ProCredit as well as the retail banks. The number of ProCredit3 In Albania and Serbia the chosen retail banks are those with the largest branch network in the respectivecountry. In Macedonia we take the largest bank in terms of assets because the availability of online branchlocation information is best for this bank. Only in Bulgaria we have to resort to the fourth largest bank in termsof assets because all three larger banks do not provide historical branch location information for 2006 online.13
anches in our sample increased from 111 in 2006 to 254 in 2010, while the number of retailbank branches increased from 352 to 653. As a consequence of this branch expansion theaverage travel distance 4 in kilometers between ProCredit branches and surveyed householdswas reduced from 21.6 km to 10.5 km. By comparison, the average distance between retailbank branches and surveyed households was reduced from 10.5 km to 7.2 km. Overall, thelarger number of bank branches and the shorter travel distances to households indicate that theretail banks chosen for our analysis have a more comprehensive coverage in the region thanProCredit bank.We measure the proximity between households and bank branches with the dummyvariables ProCredit close and Retail Bank close. These indicators are one if the nearestProCredit or retail bank branch, respectively, is within a travel distance of five kilometers ofthe PSU where a household is located, and zero otherwise. As robustness tests, we employdifferent travel distance cut-offs (10km, 20km). We use distance thresholds as opposed tocontinuous measures of travel distance in order to capture the idea that the transaction costs ofusing a bank account depend on whether a household is within walking, cycling or localpublic transport distance of a bank branch or not.[Insert Table 4 here]We relate the use of bank accounts not only to the proximity to microfinance and retailbank branches but also to the economic environment and socioeconomic characteristics ofhouseholds. Table 4 reports summary statistics for these variables. We expect the use ofaccounts to be related to the economic activity in the location of households since households.As the economic activity is arguably higher in more urban than rural areas, Town closeindicates whether the nearest city with more than 10,000 inhabitants is within a travel distance4 Travel distance, in contrast to linear distance, is the road distance between two locations as obtained fromGoogle maps.14
Page 1 and 2: Microfinance Banks and Household Ac
Page 4 and 5: stronger increase in the use of ban
Page 6 and 7: and Strøm (2010) examine data for
Page 8 and 9: of this extra interest in terms of
Page 10 and 11: households which have low transacti
Page 13: 3. Data and Methodology3.1. Life in
Page 17 and 18: eluctant to use commercial banking
Page 19 and 20: more likely to open new branches in
Page 21 and 22: The results presented in Appendix 3
Page 23 and 24: estimate the location decision of P
Page 25 and 26: etail bank is already present, ProC
Page 27 and 28: household types with the interactio
Page 29 and 30: investment in microfinance banks se
Page 31 and 32: Table 2. Variable definitions and s
Page 33 and 34: Table 4. Summary statistics of all
Page 35 and 36: Table 6. Volume effect: Univariate
Page 37 and 38: Table 8. Location and volume effect
Page 39 and 40: Table 10. Composition effect: Multi
Page 41 and 42: Appendix 2a. Albania: Bank and hous
Page 43 and 44: Appendix 2c. Macedonia: Bank and ho
Page 45: Appendix 3. Volume effect: Robustne

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