The Review of Economics and Statistics Vol. 105 No. 4 2023
Serving the Underserved: Microcredit as a Pathway to Commercial Banks
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 nonswitchers 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.
- DOI
- 10.1162/rest_a_01117
- Volume
- 105
- Issue
- 4
- Pages
- 780-797
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex