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Preferences over Bank and Family Loans in Rural Rwanda

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  • Jörg Peters
  • Annekathrin Schoofs
  • Maximiliane Sievert

Abstract

We study borrowers' preferences over bank and family loans based on field work undertaken in rural Rwanda. We randomly assigned willingness‐to‐pay questions for a hypothetical loan offer either by a bank or by a family member to a sample of 480 households. Informal family loans are typically easier to access. Because of the social costs they imply, it is widely believed that family finance is less attractive than formal finance. Our empirical results, however, show no significant difference in preferences over these two choices. This suggests that even if formal credits were widely accessible, people would still also utilize informal finance. Copyright © 2016 John Wiley & Sons, Ltd.

Suggested Citation

  • Jörg Peters & Annekathrin Schoofs & Maximiliane Sievert, 2016. "Preferences over Bank and Family Loans in Rural Rwanda," Journal of International Development, John Wiley & Sons, Ltd., vol. 28(4), pages 623-630, May.
    • Handle: RePEc:wly:jintdv:v:28:y:2016:i:4:p:623-630
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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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