Microfinance Banks and Financial Inclusion

Abstract

We examine how the geographical proximity to a microfinance bank affects financial inclusion. We study the expansion of the branch network of ProCredit banks in South-East Europe between 2006 and 2010. We report three main findings: First, ProCredit is more likely to open a new branch in areas with a large share of low-income households. Second, in locations where ProCredit opens a new branch the share of banked households increases more than in locations where it does not open a new branch. Third, this increase is particularly strong among low-income households, older households, and households which rely on transfer income.