Determinants of Access to Credit: Evidence from a Fragile Conflict-Affected Setting

This paper investigates factors that affect microentrepreneurs’ access to credit in a conflict-affected setting. Specifically, the paper focuses on the effects of loan officer, and the loan-co-insurer, a creditworthiness criterion required of borrowers who lack the physical assets needed as collateral for loan qualification. Using data from a quasiexperiment of microentrepreneurs in Liberia, the paper finds that loan officers and the loan-co-insurer criterion have negative effects on access to credit from a microfinance bank, but positive effects on access to credit from nonbank microfinance institution. Although more evidence would be required in order to generalize these results, the negative effect of the loan-co-insurer is contrary to the predominant argument of the microfinance literature about the effectiveness of social guarantees on access to credit.