Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297387 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-2
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper measures how both geographical and cultural proximity of bank branches affect household credit choice and pricing. We examine both types of proximity jointly to separately identify the importance of soft information versus alternative mechanisms. Using a detailed household-level database for Canada, we find that both geographical and cultural proximity increase consumer credit by reducing the cost of obtaining soft information. Furthermore, soft information obtained via the two types of proximity can be either substitutes for or complements to each other, with complementarity being more likely for products that require high levels of ex-ante screening. Overall, our results suggest that ongoing branch consolidation, happening in many countries, may lead to lower financial inclusion, especially in culturally diverse neighbourhoods.
Subjects: 
Credit and credit aggregates
Financial institutions
Financial services
JEL: 
D82
D83
G20
G21
R22
Z10
Z13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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