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Access to credit is an important means of providing people with the opportunity to make a better life for themselves. Loans are essential for most people who want to purchase a home, start a business, pay for college, or weather a spell of unemployment. Yet many people in poor and minority communities—regardless of their creditworthiness—find credit hard to come by, making the climb out of poverty extremely difficult. How dire are the lending markets in these communities and what can be done to improve access to credit for disadvantaged groups? In Credit Markets for the Poor, editors Patrick Bolton and Howard Rosenthal and an expert team of economists, political scientists, and legal and business scholars tackle these questions with shrewd analysis and a wealth of empirical data. Credit Markets for the Poor opens by examining what credit options are available to poor households. Economist John Caskey profiles how weak credit options force many working families into a disastrous cycle of short-term, high interest loans in order to sustain themselves between paychecks. Löic Sadoulet explores the reasons that community lending organizations, which have been so successful in developing countries, have failed in more advanced economies. He argues the obstacles that have inhibited community lending groups in industrialized countries—such as a lack of institutional credibility and the high cost of establishing lending networks—can be overcome if banks facilitate the community lending process and establish a system of repayment insurance. Credit Markets for the Poor also examines how legal institutions affect the ability of the poor to borrow. Daniela Fabbri and Mario Padula argue that well-meaning provisions making it more difficult for lenders to collect on defaulted loans are actually doing a disservice to the poor in credit markets. They find that in areas with lax legal enforcement of debt agreements, credit markets for the poor are underdeveloped because lenders are unwilling to take risks on issuing credit or will do so only at exorbitant interest rates. Timothy Bates looks at programs that facilitate small-business development and finds that they have done little to reduce poverty. He argues that subsidized business creation programs may lure inexperienced households into entrepreneurship in areas where little profitable investment is possible, hence setting them up for failure. With clarity and insightful analysis, Credit Markets for the Poor demonstrates how weak credit markets are impeding the social and economic mobility of the needy. By detailing the many disadvantages that impoverished people face when seeking to borrow, this important new volume highlights a significant national problem and offers solutions for the future.
Ten original essays examine the political and institutional factors that influence the initiation and efficiency of preferential credit policies in Korea, Taiwan, Thailand, Indonesia, the Philippines, Chile, Mexico, and Brazil.
Using new theoretical insights and cumulative empirical evidence, editors Stephan Haggard and Chung H. Lee question the wisdom of a free-market system where financial markets are concentrated and lack prudent supervision.
The first comprehensive review of credit reporting systems worldwide, including their institutional forms and evidence of their impact on financial markets. Credit reporting is a critical part of the financial system in most developed economies but is often weak or absent in developing countries. It addresses a fundamental problem of credit markets: asymmetric information between borrowers and lenders that can lead to adverse selection and moral hazard. The heart of a credit report is the record it provides of an individual's or a firm's payment history, which enables lenders to evaluate credit risk more accurately and lower loan processing time and costs. Credit reports also strengthen borrower discipline, since nonpayment with one institution results in sanctions with others. This book provides the first comprehensive review of credit reporting systems worldwide and documents the rapid growth in the industry. It offers empirical and theoretical evidence of the impact of credit reporting on financial markets, using examples from both developed and developing economies. Credit reporting, it shows, significantly contributes to predicting default risk of potential borrowers, which promotes increased lending activity. The book also covers the role of public policy in the development of credit reporting initiatives, including the role of public credit registries managed by central banks; and the role of legal, regulatory, and institutional factors in supporting credit reporting.
Export credit agencies (ECAs) have played a critical role in financing for developing countries in recent years, and officially supported export credits have been growing in volume. The current export credit exposure to developing countries and economies in transition has reached almost half a trillion dollars. This paper reviews developments in export credit markets affecting exposure, new commitments, and cover policy for developing countries and economies in transition and discusses three key issues affecting export credit markets: a more widespread involvement of ECAs in project financing transactions, a strong presence of ECAs in the market for investment insurance, and a deepening of the forfeiting market.