Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2020
  • Working Paper
  • HBS Working Paper Series

Free Riding in Loan Approvals: Evidence From SME Lending in Peru

By: Irani Arraiz, Miriam Bruhn, Benjamin N. Roth, Claudia Ruiz-Ortega and Rodolfo Stucchi
  • Format:Print
  • | Language:English
  • | Pages:46 
ShareBar

Abstract

We provide evidence that commercial lenders in Peru free ride off their peer’s screening efforts. Leveraging a discontinuity in the loan approval process of a large bank, we find competing lenders responded to additional loan approvals by issuing approvals of their own. Competing lenders captured almost three quarters of the new loans to previously financially excluded borrowers. Importantly, many of these borrowers never took a loan from our partner bank, even after our partner bank approved them. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. Our results highlight that information spillovers between lenders may operate outside of credit registries.

Keywords

Financing And Loans; Small Business; Competition; Information; Peru

Citation

Arraiz, Irani, Miriam Bruhn, Benjamin N. Roth, Claudia Ruiz-Ortega, and Rodolfo Stucchi. "Free Riding in Loan Approvals: Evidence From SME Lending in Peru." Harvard Business School Working Paper, No. 20-079, February 2020.
  • SSRN
  • Read Now

About The Author

Benjamin N. Roth

Entrepreneurial Management
→More Publications

More from the Authors

    • 2020
    • Faculty Research

    India's Food Supply Chain During the Pandemic

    By: Matt Lowe, V G Nadhanael and Benjamin N. Roth
    • 2020
    • Faculty Research

    The Allocation of Socially Responsible Capital

    By: Daniel Green and Benjamin N. Roth
    • 2020
    • Faculty Research

    Contractual Restrictions and Debt Traps

    By: Ernest Liu and Benjamin N. Roth
More from the Authors
  • India's Food Supply Chain During the Pandemic By: Matt Lowe, V G Nadhanael and Benjamin N. Roth
  • The Allocation of Socially Responsible Capital By: Daniel Green and Benjamin N. Roth
  • Contractual Restrictions and Debt Traps By: Ernest Liu and Benjamin N. Roth
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College