Credit Use, Credit Delinquency Rates and Remittances

65 Pages Posted: 19 Aug 2022 Last revised: 12 Dec 2024

See all articles by David Heres

David Heres

Banco de Mexico

David Jaume

Banco de México

Everardo Tellez de la Vega

University of British Columbia (UBC); Banco de Mexico

Martin Tobal

Banco de Mexico

Date Written: October 21, 2023

Abstract

This paper examines the impact of remittances on credit and provides the first evidence about their effect on delinquency rates. Using a dataset of more than 34 million consumer loans in Mexico and instrumenting for remittances with U.S. unemployment exposure at the municipality level, we uncover two effects overlooked in the literature. First, a “substitution” effect where low-income borrowers, especially women, use remittances to avoid delinquency. Second, a “complementary” effect where remittances increase credit but solely for securing loans with favorable terms. These findings highlight remittances’ role in reducing credit risk and supporting financial development in low- and middle-income economies.

Keywords: Remittances, Consumer Credit, Default, Financial Development

JEL Classification: G51, F30, F22

Suggested Citation

Heres, David and Jaume, David and Tellez de la Vega, Everardo and Tobal, Martin, Credit Use, Credit Delinquency Rates and Remittances (October 21, 2023). Available at SSRN: https://ssrn.com/abstract=4189160 or http://dx.doi.org/10.2139/ssrn.4189160

David Heres

Banco de Mexico ( email )

Ave Cinco e Mayo 1
Col. Centro
Mexico City, Mexico DF 06059
Mexico

David Jaume

Banco de México ( email )

Av 5 de Mayo 2
Colonia Cuahtemoc
Ciudad de México, 06000
Mexico

Everardo Tellez de la Vega

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

Banco de Mexico ( email )

Ave Cinco e Mayo 1
Col. Centro
Mexico City, Mexico DF 06059
Mexico

Martin Tobal (Contact Author)

Banco de Mexico ( email )

Ave Cinco e Mayo 1
Col. Centro
Mexico City, Mexico DF 06059
Mexico

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