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Preferences over Bank and Family Loans in Rural Rwanda
Author(s) -
Peters Jörg,
Schoofs Annekathrin,
Sievert Maximiliane
Publication year - 2016
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3217
Subject(s) - loan , work (physics) , sample (material) , bank account , finance , access to finance , economics , empirical evidence , business , public economics , payment , mechanical engineering , philosophy , epistemology , engineering , chemistry , chromatography
We study borrowers' preferences over bank and family loans based on field work undertaken in rural Rwanda. We randomly assigned willingness‐to‐pay questions for a hypothetical loan offer either by a bank or by a family member to a sample of 480 households. Informal family loans are typically easier to access. Because of the social costs they imply, it is widely believed that family finance is less attractive than formal finance. Our empirical results, however, show no significant difference in preferences over these two choices. This suggests that even if formal credits were widely accessible, people would still also utilize informal finance. Copyright © 2016 John Wiley & Sons, Ltd.