Financial Access Under the Microscope

53 Pages Posted: 7 Oct 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Thomas Kigabo

National Bank of Rwanda

Camelia Minoiu

Federal Reserve Board

Andrea Presbitero

International Monetary Fund (IMF)

André F. Silva

Federal Reserve Board

Multiple version iconThere are 2 versions of this paper

Date Written: September 11, 2018

Abstract

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

Agarwal, Sumit and Kigabo, Thomas and Minoiu, Camelia and Presbitero, Andrea and Silva, André F., Financial Access Under the Microscope (September 11, 2018). Available at SSRN: https://ssrn.com/abstract=3247796 or http://dx.doi.org/10.2139/ssrn.3247796

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Thomas Kigabo

National Bank of Rwanda ( email )

Rwanda

Camelia Minoiu (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Andrea Presbitero

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

André F. Silva

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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