Banking the unbanked: Evidence from the Spanish banking expansion plan

Abstract

What are the benefits of lifting structural impediments to banking the unbanked? We address this question by studying the Spanish Banking Expansion Plan 1964-1974, a program aimed at extending banking services into unbanked municipalities after decades of banking status quo. We exploit the quasi-experimental nature of the program to identify its effects. Selected municipalities experienced a 9% increase in the number of workers per inhabitant. This effect was driven by the lending channel, primarily through the provision of liquidity and working capital, though not through the savings channel.