Learning by Association: Micro Credit in Chiapas, Mexico

Gustavo A. Barboza and Humberto Barreto

Contemporary Economic Policy, 2006, vol. 24, issue 2, pages 316-331

Abstract: Micro credit programs provide institutional arrangements for low-income people to transit from nonmarket to market-oriented settings. This article develops a data set of payment records to determine micro credit participants' behavior on repayment performance. The findings shed new light strongly supporting micro credit as a feasible alternative to successfully provide financial resources to the poor, when controlling for asymmetric information. The empirical evidence indicates that learning by association through peer mentoring is a significant determinant in explaining high repayment rates, whereas peer monitoring is not. (JEL O1, O17, L31, J15) Copyright 2006, Oxford University Press.

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