Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/234646
Authors: 
Vera Cossio, Diego Alejandro
Year of Publication: 
2019
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-989
Abstract: 
Limited borrower information may create targeting distortions in credit markets. Community-based lending programs may reduce these distortions by exploiting information transmitted in local networks, but connections may create asymmetries in power. This paper analyzes how local leaders balance issues of neediness, productivity (TFP), risk, and favoritism to allocate subsidized loans to Thai villagers. Local leaders provided credit to richer, less-productive and elite-connected villagers. These connection-based distortions threatened the program's sustainability. Moreover, eliminating these distortions would increase village-level output by 1.5%. Finally, informal markets partially attenuated the targeting distortions by redirecting credit to unconnected households, albeit at high interest rates.
Subjects: 
Decentralization
Entrepreneurship
Targeting
Microfinance
JEL: 
D14
G21
O12
O16
O17
L14
Z13
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode
Document Type: 
Working Paper

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