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Karolin Kirschenmann (Aalto University, Helsinki):  Microfinance banks and household access to finance


Microfinance Banks and Household Access to Finance
Martin Brown, Benjamin Guin and Karolin Kirschenmann


We examine how the expansion of the branch network of a microfinance bank
between 2006 and 2010 in South-East Europe has affected the use of bank accounts by
households in the region. Our analysis is based on survey data reporting the use of bank
accounts, socioeconomic characteristics and geographic location of 8,000 households in four
countries. We geocode the location of each household and match this data with branch
location information for the major microfinance bank in the region, ProCredit Bank, as well
as for a large retail bank in each country. We report three key results: First, in locations where
ProCredit opened a new branch between 2006 and 2010 the share of households with a bank
account increased more than in locations where it did not open a new branch. Second, a new
ProCredit branch leads to a stronger increase in the use of bank accounts among low- and
middle-income households than among high-income households. Third, we find that
ProCredit not only opens branches in areas with high economic activity, but also in areas
where average household incomes are low. Overall our results suggest that microfinance
banks do expand the frontier of finance as compared to ordinary retail banks.


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