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Impact of Conditional Cash Transfers and Remittances on Credit Market Outcomes in Rural Nicaragua

  • Hernandez, Emilio
  • Sam, Abdoul G.
  • Gonzalez-Vega, Claudio
  • Chen, Joyce J.

The impact of public and private transfers on credit markets has not been sufficiently studied and understanding any spill over effects caused by these transfers may be useful for policy makers. This paper estimates the impact of Conditional Cash Transfers (CCTs) and remittances received by poor households in rural Nicaragua on their decision to request a loan. We find that, on average, CCTs did not affect the request of credit while remittances increased it, controlling for potential endogeneity. We argue the reduction in income risk provided by remittances changes borrowers’ expected marginal returns to a loan and/or their creditworthiness, as perceived by lenders. The successful enforcement of the use of CCTs on long-term investments seems to have avoided externalities on the use of short-term credit these households have access to and their creditworthiness.

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File URL: http://purl.umn.edu/49319
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Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49319.

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Date of creation: 2009
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Handle: RePEc:ags:aaea09:49319
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