NEXUS BETWEEN FOREIGN BANKS AND FINANCIAL INCLUSION: EVIDENCE FROM THE TRANSITION ECONOMIES

Year 2019, Volume: 15 Issue: 2, 249 - 262, 30.10.2019

Ekin Ayşe Özşuca

Abstract

This paper examines empirically the impact of foreign
banks on access and use of financial services for a panel of transition
economies over the period 2004-2017. Transition
economies provide rich evidence for analyzing this relationship given the predominance of foreign banks in
their banking systems. The results reveal that foreign bank presence is
positively associated with banking sector outreach indicators, such as ATM and
branch penetration, after controlling for several macroeconomic, institutional
and financial country-specific factors, however foreign bank entry is found to
have no impact on the use of financial services, as measured by borrowing per
capita. Results from low and high foreign bank threshold subsamples provide
further evidence that foreign bank penetration effects on financial inclusion
do not vary by thresholds. 

Keywords

foreign banks, financial inclusion, banking sector outreach, transition economies

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