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

In this paper, we use survey data from a sample of 29,000 households from 28 transitional countries and Turkey to address two main questions: (i) is there any effect of social trust on the use of banking services and (ii) what are the household-level and country-specific determinants of using banking services in transitional countries. We 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, we found either a very small or non-significant impact with regard to bank ownership structure on the use of banking services across households.