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From Pawn Shops to Banks : The Impact of Formal Credit on Informal Households

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dc.contributor.author Ruiz, Claudia
dc.date.accessioned 2014-02-04T16:20:30Z
dc.date.available 2014-02-04T16:20:30Z
dc.date.issued 2013-10
dc.identifier.uri http://hdl.handle.net/10986/16851
dc.description.abstract This paper examines the effects of expanding access to credit on the decisions and welfare of households. It focuses on the entry of Banco Azteca, the first bank in Mexico targeting households from the informal sector. Panel data suggest that informal households in municipalities with Banco Azteca branches experienced several changes in their saving, credit and consumption patterns. In order to estimate the impact of Azteca's entry, the paper develops a dynamic model of household choices in which the bank is endogenously selecting the municipalities for branch openings. The analysis finds that in municipalities in which the bank entered, households were better able to smooth their consumption and accumulate more durable goods even though the overall proportion of households that save went down by 6.6 percent. These results suggest that the use of savings as a buffer on income fluctuations declines once formal credit is available. What is more, these effects vary across households. Among informal households, those who never receive formal job offers have the highest decline in saving rates. The model is also used to evaluate a legislation to cap interest rates levied by formal credit institutions. Simulations suggest that if the Mexican government were to cap the interest rate of Azteca at the rate for traditional banks, Azteca would stop operating in the poorest and least populated municipalities. en
dc.language English
dc.language.iso en_US
dc.publisher World Bank, Washington, DC
dc.relation.ispartofseries Policy Research Working Paper;No. 6634
dc.rights CC BY 3.0 IGO
dc.rights.uri http://creativecommons.org/licenses/by/3.0/igo/
dc.subject LIQUIDITY
dc.subject FINANCIAL ACCESS
dc.subject DURABLE
dc.subject CONSUMER CREDIT
dc.subject CASE STUDY
dc.subject LIQUIDITY CONSTRAINTS
dc.subject PAWNSHOPS
dc.subject ACCESS TO LOANS
dc.subject INTERNATIONAL BANK
dc.subject PRODUCTIVITY
dc.subject CREDIT HISTORY
dc.subject RISK AVERSION
dc.subject DEBT
dc.subject BANK CREDIT
dc.subject BRANCH LICENSING
dc.subject PAWNSHOP
dc.subject MICROFINANCE INSTITUTION
dc.subject NATIONAL LEVEL
dc.subject NATIONAL INCOME
dc.subject CONSUMER INTERESTS
dc.subject PRODUCTION FUNCTION
dc.subject ACCESS TO CAPITAL
dc.subject DEVELOPING COUNTRIES
dc.subject OPERATING COSTS
dc.subject ENTREPRENEURS
dc.subject EMPLOYMENT OPPORTUNITIES
dc.subject FIXED COST
dc.subject MARKET PRICE
dc.subject FINANCIAL SECTOR
dc.subject CREDIT INCREASES
dc.subject STANDARD DEVIATION
dc.subject MATURITY
dc.subject MFI
dc.subject RURAL BANKS
dc.subject POSITIVE EFFECTS
dc.subject CREDIT INSTITUTION
dc.subject PAWN SHOP
dc.subject HOLDING
dc.subject LOANS FROM FRIENDS
dc.subject CREDIT PRODUCTS
dc.subject PERSONAL LOAN
dc.subject INFORMATION ON CREDIT
dc.subject ALTERNATIVE CREDIT
dc.subject MONEYLENDERS
dc.subject CONSUMPTION SMOOTHING
dc.subject AVAILABILITY OF CREDIT
dc.subject HIGH INTEREST RATES
dc.subject LENDER
dc.subject RISK SHARING
dc.subject RURAL BANK BRANCHES
dc.subject BANKS
dc.subject DEFAULTS
dc.subject INCOME SHOCKS
dc.subject LEGISLATION
dc.subject HOUSEHOLD FIXED EFFECTS
dc.subject MFIS
dc.subject DURABLE GOODS
dc.subject EDUCATION LEVEL
dc.subject LEVY
dc.subject PAWN SHOPS
dc.subject LOAN AGENTS
dc.subject BORROWING
dc.subject INTEREST RATES
dc.subject HOUSEHOLD SAVING
dc.subject ECONOMIC SITUATION
dc.subject POOR HOUSEHOLDS
dc.subject CREDIT OPTIONS
dc.subject RETURNS
dc.subject CREDIT ACCESS
dc.subject PER CAPITA INCOME
dc.subject INSURANCE
dc.subject INTERPOLATION
dc.subject LOANS FROM BANK
dc.subject VILLAGE
dc.subject ACCESS TO FORMAL CREDIT
dc.subject MUNICIPALITIES
dc.subject CREDIT PROGRAM
dc.subject FORMAL CREDIT
dc.subject VALUE OF COLLATERAL
dc.subject INSTRUMENT
dc.subject INDICATOR FUNCTION
dc.subject PEER PRESSURE
dc.subject SOCIAL BANKING
dc.subject BANK LOAN
dc.subject LIQUID ASSET
dc.subject RURAL BANK
dc.subject STANDARD ERRORS
dc.subject SIMULATIONS
dc.subject INCOME LEVELS
dc.subject SAVINGS
dc.subject UNEMPLOYMENT
dc.subject LOAN PROCESS
dc.subject EXPENDITURES
dc.subject ECONOMIC RESEARCH
dc.subject DURABLE GOOD
dc.subject SECURITIES
dc.subject LOAN REQUEST
dc.subject DURABLES
dc.subject ELASTICITY
dc.subject CONSUMER PRICE INDEX
dc.subject ECONOMIES OF SCALE
dc.subject LOAN AGENT
dc.subject CREDIT MARKET
dc.subject NEW BUSINESS
dc.subject COLLATERAL
dc.subject CREDIT INSTITUTIONS
dc.subject ACCESS TO CREDIT
dc.subject LOAN APPLICANTS
dc.subject GOODS AS COLLATERAL
dc.subject FINANCIAL STUDIES
dc.subject COOPERATIVES
dc.subject LOAN SIZE
dc.subject LOAN SIZES
dc.subject CONSUMPTION EXPENDITURES
dc.subject MICRO ENTREPRENEURS
dc.subject DEVELOPMENT POLICY
dc.subject SOCIAL SECURITY
dc.subject PAWN
dc.subject INFORMAL CREDIT
dc.subject MICROFINANCE
dc.subject ACCESS TO BANK
dc.subject BANK LOANS
dc.subject ECONOMIC GROWTH
dc.subject CREDIT ARRANGEMENTS
dc.subject MICROCREDIT
dc.subject REPAYMENT
dc.subject UTILITY FUNCTION
dc.subject DEVELOPMENT ECONOMICS
dc.subject LIQUID ASSETS
dc.subject OPERATING COST
dc.subject DEFAULT RATE
dc.subject EXPENDITURE
dc.subject COLLATERAL REQUIREMENTS
dc.subject ELIGIBILITY CRITERIA
dc.subject COMMERCIAL BANKS
dc.subject LOAN
dc.subject INCOME
dc.subject VILLAGES
dc.subject LIQUID SAVINGS
dc.subject DEMAND FOR CREDIT
dc.subject EXPECTED VALUE
dc.subject VILLAGE FUND
dc.subject DEVELOPMENT RESEARCH GROUP
dc.subject AMOUNT OF DEBT
dc.subject ABSENCE OF CREDIT
dc.subject FEDERAL RESERVE
dc.subject PAYMENT HISTORIES
dc.subject FINANCIAL INSTITUTIONS
dc.subject LOANS FROM BANKS
dc.subject INCOME SHOCK
dc.subject FINANCIAL SERVICES
dc.subject CREDIT PROVIDERS
dc.subject CONSUMPTION LEVEL
dc.subject FAMILY BUSINESS
dc.subject INTEREST RATE
dc.subject ECONOMIC ACTIVITY
dc.subject CREDIT MARKETS
dc.subject BANK BRANCH
dc.subject HOUSEHOLDS
dc.subject GOVERNMENT CREDIT
dc.subject CREDIT SCHEMES
dc.subject HOUSEHOLD LEVEL
dc.subject BUDGET CONSTRAINT
dc.subject ELASTICITY OF SUBSTITUTION
dc.subject HUMAN DEVELOPMENT
dc.subject CONSUMPTION INCREASES
dc.subject RETURN
dc.subject BANK BRANCHES
dc.subject REPOSSESSION
dc.subject STOCKS
dc.title From Pawn Shops to Banks : The Impact of Formal Credit on Informal Households en
dc.rights.holder World Bank


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