Foreign bank participation and outreach: Evidence from Mexico

Recently, developing countries have witnessed a sharp increase in foreign bank participation. We examine the impact on banking outreach using newly gathered data for Mexico, where foreign bank participation rose from 2% to 83% of assets during 1997-2005. Country-, bank-, and bank-municipality-level estimations show a decline in the number of deposit and loan accounts. While country- and bank-level estimations indicate an increase in the share of municipalities with bank branches and in the likelihood of bank presence, bank-municipality regressions show that only rich and urban municipalities benefited. Overall, the evidence is consistent with a decline in outreach.