Poverty Reducing Credit Policies ∗
نویسنده
چکیده
Capital does not simply flow unimpeded to those who can make the best use of it. Banks need assurance that loans will be repaid. For that reason, they do not lend to those who are too poor to put up collateral. Although the poor may have excellent investment opportunities, they are often excluded from financial markets and unable to invest. There is considerable empirical support for the existence of these “credit constraints” in developing countries. For example, Paulson and Townsend [12] find that the likelihood of starting a small business in Thailand increases dramatically with wealth (controlling for household characteristics that may serve as indicators of business talent). As is expected in credit constrained environments, their study suggests that the poor have higher returns from investment than the rich.
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