Information Sharing in a Competitive Microcredit Market

54 Pages Posted: 25 Mar 2020

See all articles by Jaap W.B. Bos

Jaap W.B. Bos

Maastricht University

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); Tilburg University - Department of Finance

Matteo Millone

VU University Amsterdam - Department of Finance and Financial Sector Management

Date Written: March 2020

Abstract

We analyze contract-level data on approved and rejected microloans to assess the impact of a new credit registry in Bosnia and Herzegovina, a country with a competitive microcredit market. Our findings are threefold. First, information sharing reduces defaults, especially among new borrowers, and increases the return on lending. Second, lending tightens at the extensive margin as loan officers, using the new registry, reject more applications. Third, lending also tightens at the intensive margin: microloans become smaller, shorter and more expensive. This affects both new borrowers and lending relationships established before the registry. In contrast, repeat borrowers whose lending relationship started after the registry introduction begin to benefit from larger loans at lower interest rates.

Keywords: Credit registry, information sharing, microcredit, overborrowing

JEL Classification: D04, D82, G21, G28

Suggested Citation

Bos, Jaap W.B. and De Haas, Ralph and Millone, Matteo, Information Sharing in a Competitive Microcredit Market (March 2020). CEPR Discussion Paper No. DP14464, Available at SSRN: https://ssrn.com/abstract=3560271

Jaap W.B. Bos (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Matteo Millone

VU University Amsterdam - Department of Finance and Financial Sector Management ( email )

De Boelelaan 1105
NL-1081HV Amsterdam
Netherlands

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