Segmentation and the Use of Information in Brazilian Credit Markets

Until 1994, when inflation was brought down from the sky-high levels that had prevailed since the mid seventies, the financial system in Brazil was almost entirely geared towards maximizing float income, which answered for close to half of the overall earnings of commercial banks. In that environment, being efficient in processing transactions, such as the payment of bills and checks, was paramount to banks, whereas credit granting activities received much less attention, since very little credit flowed to the private sector anyway. 4