Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru

We provide evidence that commercial lenders in Peru suffer leakages in their loan approval process. Leveraging a discontinuity in the loan approval process of a large bank, we find that receiving a loan approval from the bank causes loan applicants to receive offers from other financial institutions...

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Bibliographic Details
Main Authors:	Arraiz, Irani, Bruhn, Miriam, Roth, Benjamin N., Ruiz-Ortega, Claudia, Stucchi, Rodolfo
Format:	Journal Article
Published:	Elsevier 2022
Subjects:	INFORMATION SPILLOVER SME FINANCE BANKING FINANCIAL INCLUSION FINANCIAL SUPERVISION LOAN APPROVAL PRACTICE
Online Access:	http://hdl.handle.net/10986/36869

id	okr-10986-36869
recordtype	oai_dc
spelling	okr-10986-368692022-01-28T16:03:10Z Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru Arraiz, Irani Bruhn, Miriam Roth, Benjamin N. Ruiz-Ortega, Claudia Stucchi, Rodolfo INFORMATION SPILLOVER SME FINANCE BANKING FINANCIAL INCLUSION FINANCIAL SUPERVISION LOAN APPROVAL PRACTICE We provide evidence that commercial lenders in Peru suffer leakages in their loan approval process. Leveraging a discontinuity in the loan approval process of a large bank, we find that receiving a loan approval from the bank causes loan applicants to receive offers from other financial institutions as well. 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. 2022-01-24T19:30:04Z 2022-01-24T19:30:04Z 2021-11 Journal Article Journal of Development Economics http://hdl.handle.net/10986/36869 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Elsevier Publications & Research Publications & Research :: Journal Article Latin America & Caribbean Peru
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	INFORMATION SPILLOVER SME FINANCE BANKING FINANCIAL INCLUSION FINANCIAL SUPERVISION LOAN APPROVAL PRACTICE
spellingShingle	INFORMATION SPILLOVER SME FINANCE BANKING FINANCIAL INCLUSION FINANCIAL SUPERVISION LOAN APPROVAL PRACTICE Arraiz, Irani Bruhn, Miriam Roth, Benjamin N. Ruiz-Ortega, Claudia Stucchi, Rodolfo Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
geographic_facet	Latin America & Caribbean Peru
description	We provide evidence that commercial lenders in Peru suffer leakages in their loan approval process. Leveraging a discontinuity in the loan approval process of a large bank, we find that receiving a loan approval from the bank causes loan applicants to receive offers from other financial institutions as well. 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.
format	Journal Article
author	Arraiz, Irani Bruhn, Miriam Roth, Benjamin N. Ruiz-Ortega, Claudia Stucchi, Rodolfo
author_facet	Arraiz, Irani Bruhn, Miriam Roth, Benjamin N. Ruiz-Ortega, Claudia Stucchi, Rodolfo
author_sort	Arraiz, Irani
title	Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
title_short	Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
title_full	Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
title_fullStr	Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
title_full_unstemmed	Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru
title_sort	borrower leakage from costly screening : evidence from sme lending in peru
publisher	Elsevier
publishDate	2022
url	http://hdl.handle.net/10986/36869
_version_	1764486060368199680

Borrower Leakage from Costly Screening : Evidence from SME Lending in Peru

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