100 likes | 106 Views
Thoughts on “The Supply and Demand Side Impacts of Credit Market Information” by McIntosh, de Janvry, and Sadoulet Steve Boucher, UC-Davis Prepared for the conference: Financial Innovations and the Real Economy Federal Reserve Bank of San Francisco November 16, 2006. Outline.
E N D
Thoughts on “The Supply and Demand Side Impacts of Credit Market Information” by McIntosh, de Janvry, and Sadoulet Steve Boucher, UC-Davis Prepared for the conference: Financial Innovations and the Real Economy Federal Reserve Bank of San Francisco November 16, 2006
Outline • What I learned from Craig’s paper • More questions I’d like Craig to answer • The need for more institutional innovations in rural (agricultural) finance
Broad Lessons Learned • Information really matters! • Different types of information asymmetries matter in different ways (adverse selection versus moral hazard). • Strengthening credit bureaus represents a relatively low cost, high return strategy to strengthen credit markets
How did they do it? • Innovatively took advantage of “natural” experiment • Innovative implementation of randomized field experiment
Questions/Concerns for Craig • Potential confounding of information effect with other changes in lender behavior • To what degree does the introduction of CB’s impact the risk sharing rules of contracts? • Would individual reporting of group members’ performance have a different effect than group reporting? • How large is the “crowding out” of informal insurance that results from CB’s?
Challenge: How to extend micro-finance to rural areas? • First-stage reforms • Financial liberalization • Strengthen property rights (titling) • Follow Yunus • Results…
Frequency of Credit Constraints among Farm Households in Latin America Source: Boucher, Carter and Barham (2005) & Boucher and Guirkinger (2006)
How prevalent are credit constraints?(farm households in Peru)
Root Problems • Imperfect insurance markets • Thin land markets • Spatial nature of land (you must go to the land implies relatively few potential buyers) • politically charged nature of land (contradiction: Borrowers must be able to commit to allowing foreclosure. But land is not just another asset…) • Innovations?? • Index insurance linked to loans?