Increasing Indebtedness, Institutional Change and Credit Contracts In Peru
This paper reviews the main factors that allowed the rapid growth of credit in Peru following structural adjustment. In the 5 years to 1999, the amount of credit allocated through formal financial intermediaries increased significantly and bank loans rose to around 25% of the GDP - significantly higher than the 8% of the GDP allocated by these institutions in 1993.
The paper finds that this was stimulated by:
- Banking, Finance and Insurance Act of 1991 with the creation of specialised intermediaries;
- New practices and improvements in the procedures used by banks in client selection;
- better prudential regulation and supervision, with the objective of achieving a more effective Superintendencia de Banca y Seguros (SBS) based on the Basle Agreement;
- Providing more credit to the traditional clients, and reaching new client groups.
Concludes that the new institutional context has given rise to a range of responses by both formal and informal financial intermediaries, moving the system toward more intensive reliance on information in lending. The results of the study provide examples of successes that can be built on, and persistent obstacles that deserve closer investigation.
