Repossession and the Democratization of Credit / Juliano J. Assunção, Efraim Benmelech, Fernando S. S. Silva.

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Assunção, Juliano J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w17858.Publication details: Cambridge, Mass. National Bureau of Economic Research 2012.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers' access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w17858 (Browse shelf(Opens below))	Not For Loan

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February 2012.

We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers' access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.