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Informational asymmetries and private credit in Lima, Peru, 1825-65

Author

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  • Luis Zegarra

    (Católica Graduate Business School)

Abstract

"This article examines the credit market of Lima, Peru, in 1825-65 and analyzes the effects of information asymmetries on the allocation of credit. Family loans were associated with lower interest rates due to differences in information costs. However, private lenders did not allocate a large portion of loans to their relatives. As the elite was largely known, lenders partly coped with information asymmetries by lending to the elite. Specialists on lending also rose in response to market imperfections. By economizing on screening and monitoring, specialists partly coped with information asymmetries. The evidence also suggests that notaries served as intermediaries and reduced information costs. Nevertheless, private lenders did not fully cope with information asymmetries: high information costs severely restricted interregional lending."

Suggested Citation

  • Luis Zegarra, 2018. "Informational asymmetries and private credit in Lima, Peru, 1825-65," Working Papers 18018, Economic History Society.
    • Handle: RePEc:ehs:wpaper:18018
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    More about this item

    Keywords

    Information asymmetries; credit; Latin America; Peru;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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