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Informal and Formal Credit Markets and Credit Rationing in Côte D'Ivoire

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  • Jean Paul Azam
  • Bruno Biais
  • Magueye Dia
  • Christine Maurel

Abstract

This paper endeavours to shed light on the respective roles of the formal and the informal credit markets in developing countries. We use survey data for manufacturing firms in Côte d'Ivoire, documenting their access to informal credit markets, their investments, and their financing. We confront these data with a simple moral-hazard model of credit rationing. Because of socio-cultural effects, the magnitude of moral-hazard problems and the cost of credit can be different in the informal credit market. We offer a structural econometric estimation of this model. Our empirical results point at severe moral-hazard problems for all firms, and reduced cost of credit in the informal market. Our point estimate suggests that moral-hazard problems can be alleviated in the informal credit market. Policy implications of our results are sketched. Copyright 2001, Oxford University Press.

Suggested Citation

  • Jean Paul Azam & Bruno Biais & Magueye Dia & Christine Maurel, 2001. "Informal and Formal Credit Markets and Credit Rationing in Côte D'Ivoire," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(4), pages 520-534.
    • Handle: RePEc:oup:oxford:v:17:y:2001:i:4:p:520-534
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    Cited by:

    1. Azam, Jean-Paul & Dia, Magueye, 2004. "Pro-Poor Growth in Senegal," IDEI Working Papers 325, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Jaume Ventura & Hans-Joachim Voth, 2015. "Debt into growth: How sovereign debt accelerated the first Industrial Revolution," Economics Working Papers 1483, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Nicoletta Berardi, 2013. "Social networks and wages in Senegal’s labor market," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-26, December.
    4. Philippe Marcoul & Luc Veyssiere, 2010. "A Financial Contracting Approach to the Role of Supermarkets in Farmers' Credit Access," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1051-1064.
    5. Jean-Paul Azam, 2004. "Poverty and Growth in the WAEMU after the 1994 Devaluation," Journal of African Economies, Centre for the Study of African Economies, vol. 13(4), pages 536-562, December.
    6. Janvier D. Nkurunziza, 2005. "The Effect of Credit on Growth and Convergence of Firms in Kenyan Manufacturing," Economics Series Working Papers WPS/2005-01, University of Oxford, Department of Economics.
    7. Sucre Reyes, M.A., 2014. "Finance, growth and social fairness : Evidence for Latin America and Bolivia," Other publications TiSEM ad514338-1973-4ec9-b5c7-2, Tilburg University, School of Economics and Management.
    8. Mishra, Aswini Kumar & Bhardwaj, Vedant, 2022. "Financial access and household’s borrowing: Policy perspectives of an emerging economy," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 981-999.
    9. David W. Mushinski & Kathleen A. Pickering, 2007. "Heterogeneity in informal sector mitigation of micro-enterprise credit rationing," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 567-581.

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