NDLI: Free Riding in Loan Approvals: Evidence from SME Lending in Peru

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Free Riding in Loan Approvals: Evidence from SME Lending in Peru

Content Provider	Scilit
Author	Arraiz, Irani Bruhn, Miriam Roth, Benjamin Ortega, Claudia Ruiz Stucchi, Rodolfo
Copyright Year	2019
Description	Journal: SSRN Electronic Journal We provide evidence that commercial lenders in Peru free ride off their peer’s screening efforts. Leveraging a discontinuity in the loan approval process of a large bank, we find competing lenders responded to additional loan approvals by issuing approvals of their own. Competing lenders captured almost three quarters of the new loans to previously financially excluded borrowers. Importantly, many of these borrowers never took a loan from our partner bank, even after our partner bank approved them. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. Our results highlight that information spillovers between lenders may operate outside of credit registries.
Related Links	http://documents.worldbank.org/curated/en/203711575382940042/pdf/Free-Riding-in-Loan-Approvals-Evidence-from-SME-Lending-in-Peru.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3535740
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3535740
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2019-12-26
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Information Spillovers Sme Lending Financial Inclusion
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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