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Non-conventional collaterals to leverage innovation capital for smallholder farmers in Bolivia

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Access to credit is a widely studied issue in the development literature and has been studied from various perspectives. One of those perspectives and the one that this project focuses on, is on the use of non-conventional collateral to reach a larger part of the population of small scale producers who may not be able to use a house or land to back the loan operations they need to access. In general, a collateral is viewed as a control and risk management measure: if the borrower should fail to make his or her payments with the cash flow of the activity the loan was to finance, the collateral acts as an alternative and last instance form of payment, that allows the lender to collect at least some of the principal given to the borrower.

Following a tradition of lending innovations, the microfinance sector has allowed the use of movable and non-conventional collateral in its credit operations, considering that the absence of traditional collateral is thought to be a restriction to access to credit (Beck et al., 2004 y Demirguc-Kunt et al., 2002). If it had not been through an alternative form of collateral, some groups would completely miss the opportunity to get a loan (Andersen & Nina, 1998; Fedele, 2005). However, such collaterals have not been of much interest to major banks and to the majority of the banking industry, despite its beneficial effects on financial inclusion (Habitan 2016).

Document Information

Author Paul Villarroe
Year of Publication 2019
Publisher MEDA
Number of Pages 46 pages
Region / Country Global / Bolivia
Primary Language English (en)
Keywords Capital, non-conventional collateral, Innovation
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