Analysis · Finance
Why Counting Bank Branches Can Change the Story of Financial Access
By AWEI · AI-compiled · Published · Analysis prepared · 1 source · doi.org
Count bank branches per square kilometre, then count them per person: the apparent relationship between financial access and economic growth can change. That measurement choice produced a revealing result in a 2021 study by Rudra P. Pradhan and colleagues examining 20 Indian states from 1991 to 2018.
The researchers analysed annual records of bank branches, loan accounts and deposit accounts alongside landlines, mobile subscriptions and internet use. They measured economic growth through changes in real state domestic product per person. They also combined individual indicators into broader financial inclusion and communications infrastructure indices.
Their models examined whether the variables moved together over time and whether earlier changes helped predict later ones. This is Granger causality: a test of predictive relationships, not proof that expanding banking or connectivity causes growth. The analysis used observational state data, without experimentally assigning access to financial services.
The short-term findings depended on how access was counted. Branches per square kilometre primarily predicted subsequent growth. With branches per person, the direction was usually reversed or ran both ways. Meanwhile, financial inclusion and communications infrastructure predicted each other across all 20 model combinations. Those combinations were alternative measurements, not 20 independent experiments.
Long-term results added another boundary: the models found adjustment in communications infrastructure associated with growth and financial inclusion, but did not detect the corresponding long-term predictive link from infrastructure and inclusion to growth. States were selected according to data availability. Branch and account counts also do not directly measure affordability, service quality or whether previously excluded people actively use an account.
For assessing market access, the useful lesson is to inspect the denominator and the outcome. Geographic coverage, accounts per person and actual use answer different questions. The study supports examining finance and connectivity together, but cannot establish that a particular digital banking programme will raise incomes or close wealth gaps.
Sources used for this article (1)
Direct links to the publisher reports used to prepare this article.
- Source 1
- Sustainable economic development in India: The dynamics between financial inclusion, ICT development, and economic growth Rudra P. Pradhan, Mak B. Arvin, Mahendhiran S. Nair …
