Credit constraints, credit unions, and small-scale producers in Guatemala

Efficient and equitable development outcomes may depend, in part, on whether formal financial institutions leave low-wealth producers tightly constrained in their access to credit. If so, can cooperative institutions efficiently relax these constraints? These issues are explored using survey data gathered from 950 small-scale producer households in areas of Guatemala with market-oriented credit unions that mobilize savings and make unsubsidized loans. Nonprice rationing by banks is found to be common among lower wealth households, while credit unions relax credit constraints for a significant portion of those rationed by banks, but not the poorest of the study households. Copyright (C) 1996 Elsevier Science Ltd