The Pandemonics of Informal Credit Markets

Filipe Correia and António Martins
Authors registered in the RePEc Author Service: José Pedro Pontes

No 2020/0142, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Credit markets are at the core of any economic crisis, and informal loans are largely under studied. We collect a dataset on an online informal lending community to study the impact that the 2020 pandemic crisis had on informal credit markets. We find that these informal loans are short duration, expensive and that borrowers and lenders exhibit some sense of community. Our results suggest that the financial hardship imposed by stay athome orders is perceived as persistent, and borrowers expect lower future income, hencereducing loan demand. Moreover, loans directly associated with the pandemic are more likely to be transacted by newcomers to this market, and mentioning the pandemic in a loan request lowers the chance that it originates a loan. The absence of an increase of violations ofcommunity rules and the reduction in promised repayment time highlights the importance of informal credit communities in hard times.

Keywords: informal credit; online lending; pandemic; non-pharmaceutical interventions (search for similar items in EconPapers)
JEL-codes: G21 G50 G51 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-his and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp01422020

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