Accessibility of rural credit in Northern Nicaragua: The importance of networks of information and recommendation

Access and outreach are two sides of the same coin that currently receive much attention in the literature. This paper explores the accessibility of rural credit for the case of a rural bank in Northern Nicaragua. Both the point of view of the potential client and the bank are addressed. It is illustrated that local networks of information and recommendation are important low-cost screening mechanisms for the rural bank. It is also shown that individual access to these networks of information and recommendation related to existing clients or bank staff members is the principal factor that determines household access to the bank’s credit. The evolution of the bank into a professional financial organisation has had a significant impact on outreach over the territory. Expansion in portfolio of the bank went hand in hand with geographical expansion and more dispersion of the clients over the territory. This development has affected poor households’ access to the bank’s credit, since they depend on dense and elaborate local networks of clients in order for information and recommendation effects as elements of social collateral to develop.