TY - JOUR
T1 - Vertical links between formal and informal financial institutions
AU - Flora, Maria Sagrario
AU - Ray, Debraj
PY - 1997
Y1 - 1997
N2 - The paper investigates vertical linkages between formal and informal financial institutions. Specifically, it studies a policy that expands formal credit to informal lenders, in the hope that this will improve loan terms for borrowers who are shut out of the formal sector. Special attention is paid to the Philippines. It is argued that the effects of stronger vertical links depend on the form of lender competition. In particular, if the relationship between lenders is one of strategic cooperation (sustained by threats of reprisal in a repeated setting), an expansion of formal credit may worsen the terms faced by informal borrowers.
AB - The paper investigates vertical linkages between formal and informal financial institutions. Specifically, it studies a policy that expands formal credit to informal lenders, in the hope that this will improve loan terms for borrowers who are shut out of the formal sector. Special attention is paid to the Philippines. It is argued that the effects of stronger vertical links depend on the form of lender competition. In particular, if the relationship between lenders is one of strategic cooperation (sustained by threats of reprisal in a repeated setting), an expansion of formal credit may worsen the terms faced by informal borrowers.
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U2 - 10.1111/1467-9361.00004
DO - 10.1111/1467-9361.00004
M3 - Article
AN - SCOPUS:0031423930
SN - 1363-6669
VL - 1
SP - 34
EP - 56
JO - Review of Development Economics
JF - Review of Development Economics
IS - 1
ER -