Bank Competition and Account Penetration: Evidence from Mexico

Abstract

This paper documents a positive relation between bank competition and the penetration of bank accounts at the municipal level in Mexico. To account for potential biases in our regressions due to the endogeneity of market structure, we employ a two-stage estimation approach based on an equilibrium structural model. Our preferred estimate implies that moving from a monopoly to a duopoly will lead to an increase of 1,016 accounts per 10,000 adults, a 42 % increase over the cross-municipality mean. This is comparable to the effect of large increases in per capita income and years of schooling, or the establishment of an additional branch by a bank who is already present in the local market. Our results suggest that competition policy should be given a prominent role in the financial inclusion agenda.

Macroeconomic Impact of Pension System Upon Private Pension Funds Scheme. Empirical Evidence from Central and Eastern European Countries

“…In this regard, the study made by Anderson, Baker & Robinson (2017) shows that saving behavior is mostly driven by perceived, not actual, financial literacy of individuals and therefore people have mistaken beliefs about financial products. Financial literacy and financial inclusion can be increased by the competitiveness of financial institutions, which will develop more accessible financial products for their clients (Marin & Schwabe, 2019). Several authors had studied the link between financial literacy and people behavior, concluding that highly financial literacy is related with a decreased indebtedness (Gerardi, Goette & Meier, 2013), savings and investments in the stock market (Almenberg & Dreber, 2015), capacity to handle unexpected expenses (Hasler, Lusardi & Oggero, 2018).…”

Remittances, Bank Concentration and Credit Availability in Nigeria

“…Furthermore, it is possible to have a positive relationship between concentration and financial development as documented by Marín and Schwabe (2013). They used Mexico with the employment of two-stage estimation.…”

“…Their results suggested that concentration in the banking industry is positively associated with financial development in lower middle- and low-income countries. Marín and Schwabe (2012) documented a positive relation between local bank competition, proxied by concentration and the number of banks, and the penetration of deposit accounts and credit cards in Mexico. Love and Martínez Pería (2012) showed that competition had a positive relationship with the firm’s access to finance in a panel of 53 countries coupled with the use of Lerner index to measure competition.…”