Title

The Performance Of Village Intermediaries In Rural Credit Delivery Under Changing Penalty Regimes: Evidence From Senegal

Document Type

Article

Publication Date

10-1-1998

Publication Title

Journal Of Development Studies

Department

Economics

Abstract

This article concerns the use of village intermediaries to mitigate asymmetric information problems in rural credit delivery. We consider an example from Senegal and examine the intermediaries' screening of loan applicants. The results show that, when the intermediaries expected to incur a substantial penalty in the event of borrower default, they engaged in appropriate screening, allocating credit to borrowers likely to repay their loans. When the default penalty was lowered, however, the intermediaries engaged in opportunistic screening, emphasising political affiliation and consanguinity in their lending decisions. These results reveal both the potential efficacy of village intermediaries in allocating credit and their extreme sensitivity to penalty regimes.

Volume

35

Issue

1

pp.

115-138

ISSN

0022-0388