The Impact of Access to Credit on the Saving Behavior of Microentrepreneurs: Evidence from 3 Latin American Countries

This paper aims to shed light on changes in the saving behavior of microentrepreneurs in response to improved access to credit. This paper argues that it is necessary to extend the analysis to the shifting of assets between different forms of savings. The econometric analysis in this paper, which is...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Author Rogg, Christian S
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2000
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Summary:This paper aims to shed light on changes in the saving behavior of microentrepreneurs in response to improved access to credit. This paper argues that it is necessary to extend the analysis to the shifting of assets between different forms of savings. The econometric analysis in this paper, which is based on data from IDB evaluations of its Micro and Small Enterprise Global Programs in Ecuador, El Salvador and Paraguay, concludes that increased access to credit induces borrowers to shift their savings from livestock, jewelry and other assets with low or negative returns into deposit accounts with positive returns. This shift takes place as microentrepreneurs develop an understanding of, and confidence in, the various operations and services of the financial sector. As a result of this shift, borrowers tend to achieve a better return on their savings.