The Real Impact of Improved Access to Finance: Evidence from Mexico

This paper provides new evidence on the impact of access to finance on poverty. It highlights an important channel through which access affects povertythe labor market. The paper exploits the opening of Banco Azteca in Mexico, a unique natural experiment in which over 800 bank branches opened almost simultaneously in preexisting Elektra stores. Importantly, the bank has focused on previously underserved low-income clients. Our key finding is a sizeable effect of access to finance on labor market activity and income levels, especially among low-income individuals and those located in areas with lower preexisting bank penetration.