The impact of banking services on poverty: Evidence from sub-district level for Bangladesh Kazi Iqbal a, *, Paritosh K. Roy b , Shamsul Alam c a Bangladesh Institute of Development Studies (BIDS), E-17 Agargaon, Sher-e-Bangla Nagar, 1207, Dhaka, Bangladesh b Institute of Statistical Research and Training (ISRT), University of Dhaka c General Economics Division, Planning Commission, Government of Bangladesh A R T I C L E I N F O Article history: Received 17 August 2018 Received in revised form 1 July 2019 Accepted 17 October 2019 Available online xxx JEL classification: O16 I32 G21 Keywords: Financial inclusion Banking service Poverty reduction Bangladesh A B S T R A C T The extent to which banking services can reduce poverty is under question as recent experimental evidence has suggested that there is no impact. Our findings, based on survey and administrative data, are to the contrary. We compile a unique dataset of banking measures and poverty indicators at the level of Bangladesh’s 544 administrative sub- districts. We find a relationship between banking services and poverty reduction, and show that the relationship works through the deposit channel rather than the credit channel. We exploit variation in branch placement by sub-district between 2010 and 2015 to implement a difference-in-difference estimation approach. We also estimate ordinary least squares and fixed effects models to explore the role of factors other than banking services in poverty incidence. Broad findings supporting a role for the deposit channel, but not the credit channel, are confirmed. These results have significant policy implications as governments in developing countries are actively involved in promoting financial inclusion through the banking sector. © 2019 Elsevier Inc. All rights reserved. 1. Introduction Ample evidence exists across countries suggesting that access to financial services helps to promote economic growth and to reduce inequality and poverty (Beck, Livine, & Loayza, 2000; Levine, 2005). The extent to which economic growth itself helps reduce inequality and poverty depends on how inclusive the financial system is. That is, the growth effect of financial development becomes pro-poor when the financial system is inclusive giving poorer people access to a range of quality financial services (World Bank, 2014). Evidence based on sub-national panel data (Burgess & Pande, 2005) and household surveys (Bruhn & Love, 2014; Burgess, Wong, & Pande, 2005) also shows that greater access to banking services such as credit and saving opportunities is associated with reductions in poverty. However, recent experimental evidence has not been as encouraging, suggesting that access to banking services has no impact on outcomes such as poverty and well- being. Dupas, Dean, Robinson, and Ubfal (2018) pointed out our lack of understanding of the mechanisms through which bank access impacts the well-being of the poor. Our paper contributes to the discussion, shedding light on the relative roles of deposit and credit channels in poverty reduction. * Corresponding author. E-mail address: kiqbal@bids.org.bd (K. Iqbal). http://dx.doi.org/10.1016/j.asieco.2019.101154 1049-0078/© 2019 Elsevier Inc. All rights reserved. Journal of Asian Economics xxx (2019) xxx–xxx G Model ASIECO 101154 No. of Pages 16 Please cite this article in press as: K. Iqbal, et al., The impact of banking services on poverty: Evidence from sub-district level for Bangladesh, Journal of Asian Economics (2019), https://doi.org/10.1016/j.asieco.2019.101154 Contents lists available at ScienceDirect Journal of Asian Economics