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Determinants of credit rationing

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  • Zeller, Manfred

Abstract

Previous research on the determinants of credit rationing exclusively focused on the behavior of formal lenders who contract directly with an individual borrower. Based on a household survey in Madagascar, this paper presents an analysis of credit rationing behavior by informal lenders and by members of community-based groups that allocate formal group loans among themselves. The results show that group members obtain and use locally available information about the applicant's creditworthiness in much the same way that informal lenders do. This paper therefore empirically confirms theoretical arguments made that community-based groups have an information advantage over distant formal bank agents.

Suggested Citation

  • Zeller, Manfred, 1994. "Determinants of credit rationing," FCND discussion papers 2, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:fcnddp:2
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    References listed on IDEAS

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    1. Huppi, Monika & Feder, Gershon, 1990. "The Role of Groups and Credit Cooperatives in Rural Lending," World Bank Research Observer, World Bank Group, vol. 5(2), pages 187-204, July.
    2. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
    3. Alderman, H. & Paxson, C.H., 1992. "Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries," Papers 164, Princeton, Woodrow Wilson School - Development Studies.
    4. Bhatt, V. V., 1988. "On financial innovations and credit market evolution," World Development, Elsevier, vol. 16(2), pages 281-292, February.
    5. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, vol. 4(3), pages 351-366, September.
    6. Yadav, S. & Otsuka, K. & David, C. C., 1992. "Segmentation in rural financial markets: the case of Nepal," World Development, Elsevier, vol. 20(3), pages 423-436, March.
    7. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    8. Yaron, J., 1992. "Successful Rural Finance Institutions," World Bank - Discussion Papers 150, World Bank.
    9. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
    10. Feder, Gershon & Lau, Lawrence J. & Lin, Justin Y. & Xiaopeng Luo, 1991. "Credit's effect on productivity in Chinese agriculture : a microeconomic model of disequilibrium," Policy Research Working Paper Series 571, The World Bank.
    11. Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 219-234.
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    Citations

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    Cited by:

    1. McKernan, Signe-Mary & Pitt, Mark M. & Moskowitz, David, 2005. "Use of the formal and informal financial sectors : does gender matter? empirical evidence from rural Bangladesh," Policy Research Working Paper Series 3491, The World Bank.
    2. Menkhoff, Lukas & Rungruxsirivorn, Ornsiri, 2009. "Village Funds in the Rural Credit Market of Thailand," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 45, Verein für Socialpolitik, Research Committee Development Economics.
    3. Andrés Murcia Pabón, 2007. "Determinantes Del Acceso Al Crédito De Los Hogares Colombianos," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(55), pages 40-83, Diciembre.
    4. Moser, Christine M. & Barrett, Christopher B., 2003. "The disappointing adoption dynamics of a yield-increasing, low external-input technology: the case of SRI in Madagascar," Agricultural Systems, Elsevier, vol. 76(3), pages 1085-1100, June.
    5. Galarza, Francisco, 2003. "El crédito solidario, el colateral social, y la colusión. Algunos apuntes
      [Group Lending, Social Collateral and Collusion. Some Notes]
      ," MPRA Paper 30442, University Library of Munich, Germany.
    6. Bime, Mary-Juliet & Mbanasor, Jude Anayochukwu, 2011. "Analysis of rural credit market performance in north west region, Cameroon," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 3(3), September.
    7. Petrick, Martin, 2004. "Credit rationing of Polish farm households: a theoretical and empirical analysis," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 26, number 93022, December.
    8. Diagne, Aliou & Zeller, Manfred, 2001. "Access to credit and its impact on welfare in Malawi:," Research reports 116, International Food Policy Research Institute (IFPRI).
    9. Vuong Quoc, Duy, 2012. "Determinants of household access to formal credit in the rural areas of the Mekong Delta, Vietnam," MPRA Paper 38202, University Library of Munich, Germany.
    10. repec:pit:wpaper:269 is not listed on IDEAS

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