Banking Correspondents and Financial Inclusion in Mexico

This paper assesses the impact of the banking correspondent model, a policy enacted to enable financial intermediaries to provide basic banking and payment services through third-party nonfinancial commercial establishments, on financial inclusion in Mexico. In particular, the study focuses on determining the effect of this policy on formal savings, measured as the number of active bank accounts and the total volume of bank deposits. To achieve this, we assemble a dataset that merges bank-correspondent level information with locational and operational data on banks in Mexico. We use this data with a difference in differences model using multiple time periods to determine whether the introduction of banking correspondents has boosted formal savings in Mexico by increasing the availability of financial services. Our results show a significant positive effect of the entrance of banking correspondents on both the volume of savings (in Mexican pesos) and the number of savings bank accounts. We do not find a differentiated effect for rural municipalities. We also find evidence of a spillover effect at a municipal level that suggested that banks’ deposits would be reduced if a correspondence relation in which they are not involved begins.