ABSTRACT
This chapter tries to empirically investigate why financial cooperatives grow in some emerging economies and not in other similar ones. It examines the validity of the political economy theory proposed in the previous chapter, which argues that the quality of political institutions, in terms of the degree of openness and democracy, has influence on the development of the financial cooperative sector. The main argument here is that autocratic regimes may deliberately oppose the development of a well-functioning financial cooperative sector, whereas democracies are more willing to support the development of financial cooperatives. Using panel data from 65 developing countries from 1995 to 2014, the results show that democracy, political rights, and civil liberties promote financial cooperative development. These results are robust in controlling endogeneity as well as other economic and institutional factors.
