This paper examines the effects of providing financial services to low-income individuals on entrepreneurial activity, employment, and income. We exploit cross-time and cross-municipality variation in the opening of Banco Azteca in Mexico to measure these effects with a difference-in-difference strategy. This bank opened over 800 branches simultaneously in 2002, focusing on low-income clients. Our results show that the opening of Banco Azteca led to an increase in the number of informal business owners by 7.6 percent. Total employment also increased, by 1.4 percent, and average income went up by about 7 percent. These effects are stronger for individuals with low pre-existing income levels and in municipalities with lower pre-existing bank penetration.
