## Foreign Banks in Poor Countries: Theory and Evidence

_IMF Working Papers, January 1, 2006_

## Source details

**Canonical URL:** [Foreign Banks in Poor Countries: Theory and Evidence](https://www.imf.org/en/publications/wp/issues/2016/12/31/foreign-banks-in-poor-countries-theory-and-evidence-18772)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/foreign-banks-in-poor-countries-theory-and-evidence-18772/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/foreign-banks-in-poor-countries-theory-and-evidence-18772/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/foreign-banks-in-poor-countries-theory-and-evidence-18772/bundle-manifest.json)

## Bibliographic details
- Authors: Enrica Detragiache, Poonam Gupta, Thierry Tressel
- Published: January 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862782.001

---

### Publication metadata
- Authors: Enrica Detragiache, Poonam Gupta, Thierry Tressel
- Publication date: January 1, 2006
- Series: Working Paper No. 2006/018
- Issue: 018
- Volume: 2006
- Pages: 50
- DOI: https://doi.org/10.5089/9781451862782.001
- Stock No: WPIEA2006018
- ISBN: 9781451862782
- ISSN: 1018-5941

### Research question and scope
- Examines how foreign bank penetration affects financial sector development in poor countries.
- Combines a theoretical model with empirical cross-sectional and panel tests.
- Focus subjects: Bank credit; Banking; Commercial banks; Credit; Financial institutions; Financial markets; Financial sector development; Foreign banks; Money.

### Theoretical findings
- Theoretical model assumptions and mechanism:
  - When foreign banks are better at monitoring high-end customers than domestic banks, their entry benefits those high-end customers but may harm other customers.
  - Foreign bank entry can worsen overall welfare under these conditions.
- Model prediction:
  - Credit to the private sector should be lower in countries with more foreign bank penetration.

### Empirical findings
- Main empirical associations in poor countries:
  - A stronger foreign bank presence is robustly associated with less credit to the private sector in both cross-sectional and panel tests.
  - In countries with more foreign bank penetration, credit growth is slower.
  - In countries with more foreign bank penetration, there is less access to credit.
- Findings for advanced countries:
  - No adverse effects of foreign bank presence are found in more advanced countries.

### Keywords and topical terms (as provided)
- assets in the country; bank assets; bank assets in bank; bank consolidation; Bank credit; bank entry; bank presence; Commercial banks; cost efficiency; Credit; Financial development; Financial sector development; foreign bank; foreign banks; low-income countries; market share; mismanaged bank privatization; Sub-Saharan Africa; WP

### Key statistics and identifiers (verbatim)
- Pages: 50
- DOI: https://doi.org/10.5089/9781451862782.001
- Issue: 018
- Series: Working Paper No. 2006/018
- Stock No: WPIEA2006018
- ISBN: 9781451862782
- ISSN: 1018-5941

*IMF Working Paper — Foreign Banks in Poor Countries: Theory and Evidence (Working Paper No. 2006/018).*

---

## Content in this bundle

- **_wp0618 — Change in Private Credit to GDP and Change in Foreign Bank Presence**
  - [_wp0618 — Change in Private Credit to GDP and Change in Foreign Bank Presence (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0618.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp0618 — Change in Private Credit to GDP and Change in Foreign Bank Presence (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0618.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/foreign-banks-in-poor-countries-theory-and-evidence-18772_