Reaching out : access to and use of banking services across countries

This paper (i) presents new indicators of banking sector penetration across 99 countries, based on a survey of bank regulatory authorities, (ii) shows that these indicators predict household and firm use of banking services, (iii) explores the association between the outreach indicators and measures of financial, institutional, and infrastructure development across countries, and (iv) relates these banking outreach indicators to measures of firms’ financing constraints. In particular, we find that greater outreach is correlated with standard measures of financial development, as well as with economic activity. Controlling for these factors, we find that better communication and transport infrastructure and better governance are also associated with greater outreach. Government ownership of financial institutions translates into lower access, while more concentrated banking systems are associated with greater outreach. Finally, firms in countries with higher branch and ATM penetration and higher use of loan services report lower financing obstacles, thus linking banking sector outreach to the alleviation of firms ’ financing constraints.