Does Participation in Productive Associations Signal Trust and Credit Worthiness? Evidence for Nicaragua

📖 The Scoop

This article studies the extent to which participation in productive associations in Nicaragua contributes to increase individuals access to social programs and credit services. By participating in productive associations, individuals give a good signal to firms and are rewarded with better transactions and more access to the services they provide, ceteris paribus. Estimates using 2005 data indicate that households that participate in productive associations display higher access to credit and to social programs that promote investment. Additionally, participation in productive associations is weakly associated to more favorable credit outcomes among those households that receive loans, such as lower interest rates and a lower probability of wanting more credit than what was accessible to them.

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