Financial Access Under the Microscope
53 Pages Posted: 7 Oct 2018
Date Written: September 11, 2018
We examine the impact of a large-scale microcredit expansion program on financial access and the transition of previously unbanked borrowers to commercial banks. Administrative data on the universe of loans to individuals show that the program improved access to credit, especially in underdeveloped areas. A sizable share of first-time borrowers who need a second loan switch from microfinance institutions to commercial banks, which cream-skim low-risk borrowers and grant them larger, cheaper, and longer-term loans. These borrowers are not riskier than those already at commercial banks. The microfinance sector, together with well-functioning credit reference bureaus, help mitigate information frictions in credit markets.
Keywords: Financial Inclusion, Microfinance, Loan Expansion Programs, Credit Reference Bureau
JEL Classification: G21, O12, O55
Suggested Citation: Suggested Citation