Does distance still matter in banking? Evidence from local credit markets in Brazil
DOI:
https://doi.org/10.1590/1980-53575634tprKeywords:
Functional distance, Credit supply, Banking structureAbstract
The distance between banks and borrowers can shape the amount and quality of information used in credit decisions. This paper examines how the distance between a bank’s headquarters and its operating locations affects credit supply. Using administrative data from the Central Bank of Brazil, we construct a bank-municipality panel for 2011-2022 and exploit within-bank and within-municipality variation over time. We find a negative relationship between distance and local credit: a 100-kilometer increase in distance is associated with a reduction of approximately 4% in credit supply. We also show that this result is attenuated for banks with longer local presence, particularly among private banks, suggesting that accumulated local experience mitigates distance-related informational frictions.
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Atualizado em 14/08/2025