The Role of Credit Officers in the Performance of Microcredit Loans: Evidence from Vivacred in Brazil

This paper studies the impact of credit officers' ability on microloan performance. It focuses on the role of credit officers as an important means of dealing with asymmetric information.

Credit officers are responsible for collecting information about potential solvency of credit applicants. The paper estimates a structural model of credit provision in which credit officer ability is explicitly considered using data from Vivacred - a Brazilian NGO. In the model, credit officer performance affects the selection and enforcement of the contract.

Credit officer ability affects the probability of success of the project as well as the outcome from the auditing process of those who declared failure. Study results suggest that:

• Substantial heterogeneity was observed among credit officers in the sample;
• Credit officers' ability has a measurable effect on loan success;
• Ability is correlated with experience;
• Credit officers make a difference not only at the enforcement process but also at the selection stage;
• Probability of success of a credit contract is highly correlated with the officer's estimated ability.