Up the Lending Ladder: Extending Financial Services for the Rural Poor through Credit-Reporting Bureaus

This paper presents the context of BASIS CRSP project, "Credit-reporting Bureaus and the Deepening of Financial Services for the Rural Poor in Latin America". The project seeks to investigate the nature of credit-reporting mechanisms and how they have the potential to drive the resultant agricultural credit markets.

The author states that financial reforms have led to disappearance of subsidized lending to agriculture and this has adversely affected supply of financial services to small holders as:

• Rural smallholder requires a loan too small to attract formal lenders;
• Microfinance initiatives have largely bypassed rural poors' agricultural activities;
• Interest rates charged by local money-lenders are prohibitive.

The author argues that credit in the agricultural sector lags behind credit in urban areas due to a lack of borrower information, and identifies the following questions for research:

• How do credit bureaus improve the transfer of borrowers from the MFI sector to the formal agricultural lending sector?
• What impact do different credit reporting regimes have on different kinds of borrowers?
• How does the impact of credit bureaus vary with the characteristics of the local region or of the lender?
• What determines the process that matches certain types of borrowers with specific lenders?
• What are the strategic and legal barriers to introducing credit bureaus?