The Competition between Relationship-Based Microfinance and Transaction Lending
AbstractWe empirically analyze the competition between a relationship lender and a transaction lender in the credit business with micro and small entrepreneurs. Drawing on a data set about the customers of the relationship lender ProCredit Ecuador combined with data about all other loans of these customers in the Ecuadorian banking system, we are able to analyze the competition between different banking types. We find that the quality of ProCredit borrowers who have a trans- action loan as well is below average. They also have higher default probabilities. Furthermore, we find evidence that ProCredit customers with payment problems prefer to serve their relationship loan while defaulting on their transaction loan. These findings suggest that customers of a relationship bank value their banking relationship and try to protect it as long as possible. This result stands in contrast to the common presumption that the market entrance of transaction lenders will destroy the market for lenders applying relationship lending techniques. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 with number 31.
Date of creation: 2009
Date of revision:
Microfinance; Competition; Relationship Lending; Transaction Lending;
Find related papers by JEL classification:
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Berg, Gunhild & Schrader, Jan, 2012. "Access to credit, natural disasters, and relationship lending," Journal of Financial Intermediation, Elsevier, vol. 21(4), pages 549-568.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.