Serving the Underserved: Microcredit as a Pathway to Commercial Banks

Sumit Agarwal, Thomas Kigabo, Camelia Minoiu, Andrea Presbitero and André F. Silva
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André F. Silva: https://www.federalreserve.gov/econres/andre-f-silva.htm

No 2021-041, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: A large-scale microcredit expansion program---together with a credit bureau accessible to all lenders---can enable unbanked borrowers to build a credit history, facilitating their transition to commercial banks. Loan-level data from Rwanda show the program improved access to credit and reduced poverty. A sizable share of first-time borrowers switched to commercial banks, which cream-skim less risky borrowers and grant them larger, cheaper, and longer-maturity loans. Switchers have lower default risk than non-switchers and are not riskier than other bank borrowers. Switchers also obtain better loan terms from banks compared with first-time bank borrowers without a credit history.

Keywords: Access to credit; Microfinance; Unbanked; credit bureaus; Bank loans (search for similar items in EconPapers)
JEL-codes: G21 O12 O55 (search for similar items in EconPapers)
Pages: 78 p.
Date: 2021-07-15
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-isf, nep-mfd and nep-pay
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Citations: View citations in EconPapers (3)

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https://www.federalreserve.gov/econres/feds/files/2021041pap.pdf (application/pdf)

Related works:
Journal Article: Serving the Underserved: Microcredit as a Pathway to Commercial Banks (2023)
Working Paper: Serving the Underserved: Microcredit as a Pathway to Commercial Banks (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-41

DOI: 10.17016/FEDS.2021.041

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