Determinants of the Locations of Alternative Financial Service Providers
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Many low-to-moderate income US households rely upon alternative financial service providers (AFSPs) for a variety of credit products and transaction services. The social welfare implications of this segment of the financial services industry are quite controversial. One aspect of the controversy involves the location decisions of AFSPs. This study examines the determinants of the locations of three types of AFSPs: payday lenders, pawnshops, and check-cashing outlets. Using county-level data for the entire country, I find that the number of AFSP outlets per capita is significantly related to demographic characteristics of the county population, measures of the population’s creditworthiness, and the stringency of state laws and regulations that govern AFSPs.
KeywordsAlternative financial services Check cashers Pawnshops Payday lending
I am grateful to Matt Fellowes and Mia Mabanta for providing data on the number of payday loan stores, pawnshops, check-cashing outlets, and credit union branches in each US county; the editor and two anonymous referees for valuable comments and suggestions; and Stefanie Ramirez and Sharada Sridhar for outstanding research assistance
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