| Abstract: |
We examine the impact of a large-scale microcredit expansion program on
financial access and the transition of previously unbanked borrowers to
commercial banks. Administrative data on the universe of loans to individuals
show that the program improved access to credit, especially in underdeveloped
areas. A sizeable share of first-time borrowers who need a second loan switch
from microfinance institutions to commercial banks, which cream-skim low-risk
borrowers and grant them larger, cheaper, and longer-term loans. These
borrowers are not riskier than those already at commercial banks. The
microfinance sector, together with well-functioning credit reference bureaus,
help mitigate information frictions in credit markets. |