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Sowing the seeds for rural finance the impact of support services for credit unions in Mexico

 

Sowing the seeds for rural finance the impact of support services for credit unions in Mexico
This paper studies the impact of a
program that provides grants for technical assistance on the
interest rates and outreach of credit unions in Mexico.
Credit unions financing rural borrowers received grants in
different years. The study uses propensity score matching
and relies additionally on the timing of the grants to
identify effects. The analysis shows that the program
lowered lending interest rates by up to 2.6 percentage
points (from a pre-program average of 17.8 percent). This
drop appears to be due to lower operating costs and better
risk management, as reflected in a lower nonperforming loan
ratio. The program also raised credit unions’ returns
on assets and significantly increased the value of their
loan portfolio.
Source: The World Bank – Finance and Financial sector development