Increasing Indebtedness, Institutional Change and Credit Contract in Peru

Abstract

This paper reviews the main causes of the rapid growth of credit in Peru during the 1990s. The creation of new types of lending intermediaries besides traditional banks has allowed debt to increase and credit to be extended to new classes of borrowers such as middle and lower-class urban residents. Improvements in information-sharing, borrower selection and the range of public and private arrangements available have further aided the expansion of credit. Evaluating several case studies, the paper concludes that credit growth remains limited by inefficient judicial enforcement procedures and insufficient information on borrowers` credit risk.