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Determinants of credit rationing

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Author Info
Zeller, Manfred
Abstract

Previous research on the determinants of credit rationing exclusively focused on the behavior of formal lenders who contract directly with an individual borrower. Based on a household survey in Madagascar, this paper presents an analysis of credit rationing behavior by informal lenders and by members of community-based groups that allocate formal group loans among themselves. The results show that group members obtain and use locally available information about the applicant's creditworthiness in much the same way that informal lenders do. This paper therefore empirically confirms theoretical arguments made that community-based groups have an information advantage over distant formal bank agents.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series FCND discussion papers with number 2.

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Date of creation: 1994
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Handle: RePEc:fpr:fcnddp:2

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Keywords: Banks and banking Africa. ; Credit Madagascar ;

References listed on IDEAS
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  1. Alderman, Harold & Paxson, Christina H & DEC, 1992. "Do the poor insure? A synthesis of the literature on risk and consumption in developing countries," Policy Research Working Paper Series 1008, The World Bank. [Downloadable!]
    Other versions:
  2. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February. [Downloadable!] (restricted)
  3. Bhatt, V. V., 1988. "On financial innovations and credit market evolution," World Development, Elsevier, vol. 16(2), pages 281-292, February. [Downloadable!] (restricted)
  4. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Yadav, S. & Otsuka, K. & David, C. C., 1992. "Segmentation in rural financial markets: the case of Nepal," World Development, Elsevier, vol. 20(3), pages 423-436, March. [Downloadable!] (restricted)
  6. Huppi, Monika & Feder, Gershon, 1990. "The Role of Groups and Credit Cooperatives in Rural Lending," World Bank Research Observer, Oxford University Press, vol. 5(2), pages 187-204, July.
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  7. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  8. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, Oxford University Press, vol. 4(3), pages 351-66, September.
  9. Yaron, J., 1992. "Successful Rural Finance Institutions," World Bank - Discussion Papers 150, World Bank.
  10. Feder, Gershon & Lau, Lawrence J. & Lin, Justin Y. & Xiaopeng Luo, 1991. "Credit's effect on productivity in Chinese agriculture : a microeconomic model of disequilibrium," Policy Research Working Paper Series 571, The World Bank. [Downloadable!]
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