Research Insights: What Are the Impacts of Bank Branch Closures on Local Firms?
Peer Reviewed
Date issued
October 2024
Subject
Mobile Banking;
Municipal Government;
Financial Service;
Digital Technology;
Small Business;
Formal Labor;
Labor;
Digital Platform;
Wage;
Economy;
Artificial Intelligence;
Census;
Labor Force
JEL code
G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages;
R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes;
J21 - Labor Force and Employment, Size, and Structure
Category
Catalogs and Brochures
As several major banks in Latin America have reduced their branch networks in recent years, many firms have lost access to their local bank. Bank branch closures result in a reduction in firm establishments with active operations from 1.2% initially to 8.1% within 4-7 years, a 0.5 decline in weekly hours of formal employment, and a compression of the real wage distribution. Micro firms, trade and service firms, and agricultural firms are found to be the most vulnerable.
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