Banking Concentration and Health Performance in Developing Countries

ABSTRACT This article examines how banking concentration affects health performance in 80 emerging nations between the years 2000 and 2020. The system GMM and OLS‐FE approaches are employed. Health performance in terms of life expectancy is negatively impacted by bank concentration. Limited access to credit and poor education increase the negative effect of bank concentration on health performance. The results are robust to alternative measures as well as an alternative estimation technique. It is recommended that governments in developing countries restructure the banking market so that the productivity gains induced by the concentration and power of banks are translated into lower credit costs. It is also relevant to switch from confiscatory to distributive concentration, which is advantageous to all parties involved. Other recommended policy measures include: the enhancement of competition, favoring the streamlining of operations in the banking sector, fostering innovation, and engaging in regulatory changes.