The Real Impact of Improved Access to Finance: Evidence from Mexico

This paper consolidates the results of an evaluation conducted to assess the impact of increased access to financial services for low-income individuals on their entrepreneurial activity, employment, and income. It does so by exploring the opening of Banco Azteca in Mexico, in which over 800 bank branches opened almost simultaneously in pre-existing Elektra stores. The predetermined nature of the branch locations were used to identify the casual impact of Azteca's opening on economic activity through a difference-in-difference strategy. Key findings include:

• Banco Azteca helped informal business owners keep their business running instead of becoming wage earners or unemployed;
• Fraction of informal business owners increased by 7.6%, and overall employment increased by about 1.4% as a result of Azteca's opening;
• Increases in informal business ownership and employment led to an increase in income of about 7% on average;
• Impact was more pronounced for individuals with below-median income levels, which was the population targeted by Banco Azteca;
• GDP per capita growth rates also increased following the opening of Banco Azteca.