An Empirical Equilibrium Model of Formal and Informal Credit Markets in Developing Countries

PurposeA review of literature has documented that accessing formal credit and other banking services has always been a crucial challenge for small and medium-sized enterprises (SMEs). The alternative, therefore, tends to be informal channels. However, the credit constraint vis-à-vis informal channel link does not appear to be well documented in the literature. This study aims to investigate whether credit constraints significantly affect the probability of accessing informal credit, as well as the credit values of Vietnamese SMEs.Design/methodology/approachThis study uses a trinary approach and correlated random-effects Probit and Tobit techniques to avoid the incidental coefficients problem.FindingsThe results suggest that relative to unconstrained and partially constrained firms, fully constrained firms tend to be more active in the informal credit markets, shown by their higher probability of informal credit access and larger credit values.Originality/valueTo the best of authors’ knowledge, this is the first study on Vietnam that takes a different approach to credit constraints and examines their impact on informal credit access. Policy implications arise and are discussed.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2017-0543

Download Full-text

Prying into the Shadows: A General Equilibrium Model to Analyze the Effects of the Emerging Institutions on the Structure of Production and Welfare in Developing Countries

SSRN Electronic Journal ◽

10.2139/ssrn.1014646 ◽

2007 ◽

Author(s):

Md. Abul Basher

Keyword(s):

Developing Countries ◽

General Equilibrium ◽

Equilibrium Model ◽

General Equilibrium Model ◽

Structure Of Production

Download Full-text

Parish banking in informal credit markets: the business of private lending in early nineteenth-century Sweden

Financial History Review ◽

10.1017/s0968565017000087 ◽

2017 ◽

Vol 24 (1) ◽

pp. 83-102 ◽

Cited By ~ 1

Author(s):

Håkan Lindgren

Keyword(s):

Early Modern ◽

Credit Markets ◽

Banking System ◽

Early Modern Europe ◽

Early Nineteenth Century ◽

Informal Credit ◽

Access To Credit ◽

Private Lending ◽

Banking Business ◽

Intimate Knowledge

This study demonstrates the existence of a private, informal and lively credit market in rural Sweden during the 1840s, a period that predates the development of a modern banking system. The market, mainly based on private promissory notes, was concentrated in the hands of a limited number of wealthy farmers who specialized in lending, They facilitated access to credit to well-off farmers, regardless of whether they owned their farms or leased taxed land. By using information from probate inventories, the article analyses the wealth portfolio and characteristics of the lending business of the largest creditors (‘parish bankers’) in a judicial district of southern Sweden in 1841–5. The heart and soul of their business was an intimate knowledge of borrowers’ creditworthiness and mutual trust, as typical of local credit networks. The article also explores the existence of an intergenerational transmission of parish banking business – a dimension of private lending that opens an original path of research on local credit markets in early modern Europe.

Download Full-text