Cross-country analysis on the impact of ownership structure on access to financial services

The availability of financial services is an important measure of national economic development. Privatization of banks increased in many countries after the early 1990's in response to structural adjustment policies and pressure from foreign competition. This paper examines the relationship between access to financial services and the share of foreign and state ownership structures. Data are from the World Bank and the Inter-American Development Bank. Controlling for factors related to economic and infrastructure development, linear regression models test how ownership structures are correlated with levels of access to financial services. State and foreign ownership of banks is negatively associated with the availability of financial services suggesting that access to financial services is not necessarily dependent on who owns the banks. Mobile telephony is positively related to access and outreach of financial services while rural populations had a negative relationship to access. This paper argues that while there is space for the government as a service provider, governments should focus efforts on strengthening the regulatory environment and investing in national infrastructure. By improving the investment environment, the government will contribute to the improvement of economic opportunities for all members of the population.