Introduction: Imperfect Information and Rural Credit Markets—Puzzles and Policy Perspectives

Credit market access in Uganda: evidence from household survey data 1999/2000

“…Hoff and Stiglitz (1990) term this the relationship-specific social capital built between the lender and the borrower and used as a non-price-related mechanism for credit rationing. The stronger and more long-standing the relationship, the lower the probability of the borrower's credit being rationed.…”

“…This motivates formal lenders to adopt strict collateral requirements as a screening mechanism to minimise default risk, hence keeping small borrowers out of formal credit markets or rationing their credit. At the household level, low levels of income and asset accumulation, widespread poverty and highly skewed income and asset distribution give small households a high risk profile which makes them less attractive to formal lenders (Hoff & Stiglitz, 1990). Even in informal credit markets, lenders have designed non-price mechanisms for screening and rationing borrowers (Zeller, 1994).…”

Institutional Analysis of Financial Market Fragmentation in Sub-Saharan Africa: A Risk-Cost Configuration Approach

“…For example, Hoff and Stiglitz (1990) and Conning and Udry (2005) explain segmentation into formal and informal markets typically observed in developing countries by the structural differences in the cost and risk characteristics of different types of transactions. This is a clear elevation from the previous, almost exclusive, reliance on the policy-based explanation embedded in the financial repression hypothesis (Fry 1982(Fry , 1988Roe 1991) for this critical issue in finance and development.…”

“…We emphasized the possibility of financial sector development, building on the strengths of informal institutions in SSA. Here it may suffice to note that, broadly speaking, institutional measures for financial market transformation should directly address the informational problems and the incentive (agency) problem, and the contract enforcement problems (Hoff and Stiglitz 1990;Conning and Udry 2005). These should therefore encompass measures aimed at: strengthening legal systems related to property rights safeguards and contract enforcement; accumulating information capital; improving the governance/incentive structure; and intensifying market network development.…”

Cost-effective provision of environmental services: the role of relaxing market constraints

“…Input and output quotas are obvious examples and, at the extreme, markets may be missing completely. Beyond this, perhaps the most frequent example of non-price rationing in developing countries is credit rationing (e.g., Hoff and Stiglitz, 1993). While there are several definitions of credit rationing, it is usually thought of as a situation in which the borrower's private demand is higher at the current rate of interest than the loan offered by the lender (Petrick, 2005).…”