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Social trust and use of banking services across households in 28 transitional countries

Elvin Afandi (Islamic Corporation for the Development of the Private Sector, Islamic Development Bank Group, Jeddah, Kingdom of Saudi Arabia)
Nazim Habibov (School of Social Work, University of Windsor, Windsor, Canada)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 11 April 2016

367

Abstract

Purpose

The purpose of this paper is to use survey data from a sample of 29,000 households from 28 transitional countries and Turkey to address two main questions: first, is there any effect of social trust on the use of banking services; and second, what are the household-level and country-specific determinants of using banking services in transitional countries.

Design/methodology/approach

The authors use binary probit models, instrumental variables methods and various econometric specifications to test the hypothesis.

Findings

The authors found that the higher level of trust in people predicts a greater level in use of banking services by households regardless of the model specifications and econometric adjustments employed. This association appears to be more prominent among less educated respondents and in countries with low levels of legal enforcement. The results also suggest that location, income and wealth of households, along with country income level, legal enforcement and inflation rates strongly affect the decisions made by households regarding their use of banking services. In contrast, the authors found either a very small or non-significant impact with regard to bank ownership structure on the use of banking services across households.

Originality/value

To the best of the knowledge this is the first study which specifically focusses on social trust and the usage of formal banking services across a large set of transitional countries.

Keywords

Acknowledgements

JEL Classification — G21, P20, O16

Citation

Afandi, E. and Habibov, N. (2016), "Social trust and use of banking services across households in 28 transitional countries", International Journal of Social Economics, Vol. 43 No. 4, pp. 431-443. https://doi.org/10.1108/IJSE-10-2014-0204

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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