Rural banks and regional growth
Date
2017
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Abstract
This is a study about the contribution of Philippine rural banks to regional
development. Rural banks are crucial for inclusive growth as they are the primary capital source of small borrowers outside the National Capital Region. Rural bank involvement is measured in loans, deposits, and banking density. Regional growth indicators used are Gross Regional Domestic Product per capita and Household Financial Consumption Expenditure per capita. Using OLS, Probit, Fixed Effects, Random Effects, and Simultaneous Equations Models, our results show that the relationships between growth and the rural banking sector variables do not conform to theoretical studies. The relationships are significant but predominantly negative, which means that the banking sector decreases growth in the Philippine regions. Results also show that rural banks are more likely to be a by-product of regional growth instead of vice versa. This study broadens understanding and literature about the current status of the Philippine rural banks, and how policy could influence rural banks for further development.
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Keywords
Finance-Growth, Rural Banks, Loans, Deposits, Banking Density, Regional growth