Moneylenders in Developing Countries
Moneylenders are a principal source of credit in developing countries. They thrive where collateral is scarce and legal enforcement of debt contracts is difficult. Their advantages over banks include better knowledge about creditworthiness of their clientele and greater ability to enforce repayment. Landlords lend to their sharetenants because they can capture a larger share of the tenants’ surplus than can outside lenders. Other credit by moneylenders is in kind, such as in the form of input advances or deferred rent. The effects of government credit policies depend importantly on the relationship between moneylenders and banks.
KeywordsAgricultural finance Asymmetric information Credit markets in developing countries Informal sector Moneylenders in developing countries
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