Work

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Year: 2005

Type: article

Abstract: Lack of access to finance is often cited as a key reason why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirial evidence on this issue. Between 1977 and 1990, the Indian Central Bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches. We show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse is true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output.

Source: American Economic Review

DOI: 10.1257/0002828054201242

Authors: Robin Burgess, Rohini Pande

Institutions: National Bureau of Economic Research, Centre for Economic Policy Research, London School of Economics and Political Science, Yale University

Language: English

Topic: Microfinance and Financial Inclusion

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: No poverty, Decent work and economic growth, Reduced inequalities, Industry, innovation and infrastructure

Open Access status: green

OpenAlex ID: W2052902050