Rev Ind Organ (2014) 45:21–38
Determinants of the Locations of Alternative Financial
Robin A. Prager
Published online: 11 April 2014
© Springer Science+Business Media New York (outside the USA) 2014
Abstract Many low-to-moderate income US households rely upon alternative ﬁnan-
cial 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.
Keywords Alternative ﬁnancial services · Check cashers · Pawnshops ·
A large number of low-to-moderate income US households rely upon alternative ﬁnan-
cial service providers (AFSPs) for a variety of credit products and transaction services,
including payday loans, pawn loans, automobile title loans, tax refund anticipation
The views expressed in this paper are those of the author and do not necessarily reﬂect the views of the
Board of Governors of the Federal Reserve System or its staff.
R. A. Prager (
Board of Governors of the Federal Reserve System, 20th and C Streets, NW,
Washington, DC 20551, USA