Microfinance Banks and Household Access to Finance

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The Table 9, Panel B results suggest that in regions where a retail bank is not present newmicrofinance bank branches are associated with a similar effect among low-incomehouseholds (50 percentage points) and high-income households (56 percentage points).stronger increase in the use of bank accounts among high-income and informal-incomehouseholds. There seems to be a stronger difference in the impact of new ProCredit brancheson informal-income households (50 percentage points) as opposed to formal-incomehouseholds (63 percentage points).Due to the low number of observations in many cells in Panel B our results for thesubsample of pairs which are not close to a retail bank should be interpreted with care.Nevertheless, a comparison of the Panel A and Panel B results does confirm the predictions ofour model in section 2: The relative impact of a microfinance bank on low-income householdsis stronger in regions where a retail bank is present compared to regions where the retail bankis not present. The intuition behind this result is that in the former regions high-incomehouseholds already have access to bank accounts through the retail bank, so that theincremental effect of the microfinance bank is strongest for low-income households. Bycontrast, in regions without a retail bank both high-income and low-income householdsbenefit from the entry of the microfinance bank. 8[Table 10 here]Table 10 provides a multivariate analysis of the composition effect. Hereby we replicateour analysis from Table 8, capturing differential effects of the microfinance bank across8 Indeed, as suggested by our Panel B results, the impact of the microfinance bank in theseregions may be stronger for high-income than for low-income households. The intuitionbehind this surprising result is that while all high-income and moderate income households4 3( δ , δ in our model) open accounts with the microfinance bank, only some low-incomellhouseholds do so ( δ but not2l1δlin our model).25
household types with the interaction effects Low income*D.ProCredit close and Informalincome*D.ProCredit close. Columns (1-4) display estimates for those household pairs whichare close to the retail bank. For this subsample we provide both OLS and IV estimates. In ourIV estimates we instrument D.ProCredit as in Table 8 with the 2010 PSU averages of LowIncome, Informal, Female, Muslim as well as Town close. For results and diagnostic statisticsof the first stage regression we refer the reader to Table 8, column (1). Columns (5-6) ofTable 10 display estimates for those household pairs which are not close to the retail bank.Here we provide only OLS estimates due to the weakness of our instruments in thissubsample (see Table 8, column 2).The column (1-2) estimates of Table 10 confirm our univariate findings for households inlocations close to a retail bank. The positive and significant estimate for Low income*D.ProCredit close suggests that in locations where Procredit opens a new branch low-incomehouseholds increase the use of bank accounts more than high-income households. Our pointestimates suggest that a new ProCredit branch increases the likelihood of using a bankaccount by 18 percentage points more for low income households than for high incomehouseholds. The column (3) estimates suggest further, that the differential impact of newProCredit branches in low-income households is only partly driven by the endogeneity ofbranch locations. The point estimates in our IV specifications suggest that a new ProCreditbranch increases the likelihood of using a bank account by 16 percentage points more for lowincome households than for high income households. By contrast the insignificant estimatefor Low income* D.ProCredit close in columns (2) and (4) suggests that in locations whereProCredit opens a new branch informal-income households are not more likely to open a bankaccount as compared to high income households.The column (5-6) results also confirm our univariate findings for households in locationsnot close to a retail bank. The significant estimates for Low income*D.ProCredit close andInformal income* D.ProCredit close suggest that when ProCredit opens a new branch in these26
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 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 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: etail bank is already present, ProC
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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