Microfinance Banks and Household Access to Finance

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The second row of Table 6 present results for household pairs which are not close to aretail bank in 2006 or 2010. The results in this row show that the use of bank accountsincreases by 54 percentage points over time in those locations where ProCredit bank did opena new branch as compared to 13 percentage points in regions where no new branch wasopened. The difference-in-difference estimate suggests that the use of bank accountsincreased by 41 percentage points more in areas without a retail bank but where ProCreditBank opened a new branch between 2006 and 2010.[Insert Table 6 here]The Table 6 results suggest that the volume effect of microfinance branches is significantlylower in regions where a retail bank branch is present compared to regions where the retailbank is not present. This confirms the predictions of our model in section 2. That said, theresults for the subsample where the retail bank is not close have to be interpreted with carebecause of the low number of pairs which are located in areas with new ProCredit branches(only 30 observations).In Appendix 3 we test whether the difference-in-difference results displayed in Table 6 arerobust to changes in the distance thresholds employed in our matching procedure andempirical analysis. The analysis presented above defines “closeness” to a ProCredit branch, aretail bank branch, or a town as lying within a 5km radius of the nearest branch or town. Inour robustness tests we extend this radius to 10km (Panel A) and 20km (Panel B). By doingso the number of observations available for our empirical analysis is reduced as ouridentification strategy relies on considering only those households which are not close to aProCredit branch in 2006. At the same time, the share of observations in our two subsamples– retail bank “close” and retail bank “not close” - shifts towards the former as we extend theproximity radius.19
The results presented in Appendix 3 confirm our findings for the subsample of householdswhich are located close to a retail bank. In this subsample, a new ProCredit branch isassociated with an increase in bank account use by 27 percentage points (Panel A – 10 kmradius) and 32 percentage points (Panel B – 20 km radius), respectively. As a result of theabove mentioned changes in sample composition we can no longer estimate reliabledifference-in-difference effects for the subsample of households which are not close to a retailbank. The reason is that in Panel A we observe only 10 household pairs which are not close toa retail bank and where ProCredit opens a new branch between 2006 and 2010. In Panel B weobserve 9 such households.The univariate results displayed in Table 6 are confirmed by the multivariate analysispresented in Table 7. Here we report the outcome of first-difference GLS regressions relatingthe change in account use (D.Account) within each household pair over time to the change inProCredit being within a five kilometer travel distance (D.ProCredit close). The regressiondoes not include the covariates Town close, Low income or Informal income as householdspairs are matched on these characteristics. We control for differences in all socioeconomiccharacteristics within household pairs that are not used in the matching procedure and thusmay vary across observation periods. Standard errors are reported in brackets and areclustered at the matched household pair-level.Column (1) of Table 7 provides estimates for the subsample of household pairs which areclose to the retail bank, while column (2) provides estimates for households which are notclose to the retail bank. We find that for households that are close to a retail bank the use ofaccounts increases by 26 percentage points when ProCredit opens a new branch within thefive kilometer travel distance radius between 2006 and 2010. For households which are notclose to a retail bank the effect from a new ProCredit branch is an increase in the use bankaccounts by 38 percentage points. Thus in line with our univariate results these multivariateresults suggest a significant volume effect of new ProCredit bank branches. Moreover, our20
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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 and 14: 3. Data and Methodology3.1. Life in
Page 15 and 16: anches in our sample increased from
Page 17 and 18: eluctant to use commercial banking
Page 19: more likely to open new branches in
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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