The effect of information sharing between lenders on access to credit, cost of credit, and loan performance - evidence from a credit registry introduction

Abstract

Using a rich dataset from a commercial bank in Albania, we utilize the introduction of a public credit registry by the Albanian central bank in January 2008 as a natural experiment to analyze the effect of information sharing between lenders on (1) access to credit, (2) cost of credit, and (3) loan performance. Our results suggest that information sharing by means of a credit registry does not affect access to or cost of credit, but improves loan performance. Specifically, loans granted after the introduction of the credit registry are 3% points less likely of turning problematic, representing a 35% reduction of the overall sample average arrear probability. We further find that the effect is more pronounced for repeat borrowers and in areas, where competition is weak. This indicates that information sharing among lenders improves loan performance mainly by disciplining borrowers to repay in their concern about future access to credit. (C) 2012 Elsevier B.V. All rights reserved.