The Effects of Lending Quotas

Diego A. Vera-Cossio and Sergio Andres Garbay Flores

No 14680, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: We study the eects of sectoral lending quotas in Bolivia, which required lenders to allocate a minimum share of their portfolios to priority sectors. Exploiting the timing of the reform and variation in pre-policy compliance at the lender and locality levels, we estimate impacts on credit markets and economic activity. To meet the quotas, lenders compressed their nancial margins and expanded their branch networks. The resulting credit expansion outpaced deposit growth, raising loan-to-deposit ratios persistently, leaving lenders more exposed to liquidity shocks. At the local level, the credit expansion raised household income by 7.8%, driven largely by self-employment in non-priority sectorsthe very sectors the policy did not target. Our ndings illustrate how sectoral policies can generate important trade-os and equilibrium consequences that extend well beyond their intended objectives.

JEL-codes: D21 G21 G28 O16 O25 R11 (search for similar items in EconPapers)
Date: 2026-08
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14680

DOI: 10.18235/0014438

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