Consumer Loans, Heterogeneous Interest Rates, and Inequality
Year: 2023
Content-Type: Research Paper
Description: Financial intermediaries such as banks play a critical role in the economy by connecting those seeking to borrow with those seeking to save, improving the allocation of resources with consequences for efficiency and welfare. Consequently, consumer credit is key to allowing individuals to smooth consumption over time when they face uninsurable idiosyncratic income risk. Credit markets in developing countries are characterized by high and dispersed borrowing interest rates (e.g., Banerjee, 2003; Banerjee and Duflo, 2010). Expensive credit may hinder the ability of individuals to smooth their consumption. Using the Brazilian Public Credit Register, which is a confidential loan level dataset, covering all unsercure credit operations in Brazil from January 2012 to December 2019 and linked with the Brazilian matched employer-employee data set (RAIS), we document several features of the Brazilian credit market. We focus on two types of loans, which account for more than 80% of all unsecured consumer loans in Brazil.
Pages: 8 pages
Author: Cesar, Santoz
Categories: Economic Development / Stability, Economy, Policy / Governance, Publications, Quality of Life, Risk
Tags: Banks, Development, Economic Development, Policies, Risk Management