Informal and Formal Credit Markets and Credit Rationing in Cote De Ivoire

Posted: 18 Nov 2003

See all articles by Bruno Biais

Bruno Biais

Centre for Economic Policy Research (CEPR)

Jean-Paul Azam

University of Toulouse I - Advanced Research in Quantitative Applied Development Economics (ARQADE)

Magueye Dia

University of Oxford - Said Business School

Christine Maurel

University of Toulouse 1 - Toulouse School of Economics (TSE)

Abstract

This paper endeavours to shed light on the respective roles of the formal and the informal credit markets in developing countries. We use survey data for manufacturing firms in Cote de Ivoire, documenting their access to informal credit markets, their investments, and their financing. We confront these data with a simple moral-hazard model of credit rationing. Because of socio-cultural effects, the magnitude of moral-hazard problems and the cost of credit can be different in the informal credit market. We offer a structural econometric estimation of this model. Our empirical results point at severe moral-hazard problems for all firms, and reduced cost of credit in the informal market. Our point estimate suggests that moral-hazard problems can be alleviated in the informal credit market. Policy implications of our results are sketched.

JEL Classification: G32, N27, O16, O17

Suggested Citation

Biais, Bruno and Azam, Jean-Paul and Dia, Magueye and Maurel, Christine, Informal and Formal Credit Markets and Credit Rationing in Cote De Ivoire. Available at SSRN: https://ssrn.com/abstract=443962

Bruno Biais (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jean-Paul Azam

University of Toulouse I - Advanced Research in Quantitative Applied Development Economics (ARQADE) ( email )

21 Allee de Brienne
Toulouse, 31000
France

Magueye Dia

University of Oxford - Said Business School ( email )

Park End Street
Wellington Square
Oxford OX1 2JD
United Kingdom

Christine Maurel

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France
+33 (0)5 61 12 85 31 (Phone)
+33 (0)5 61 12 85 38 (Fax)

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