Determinants of the persistence of informal credit in Brazil
DOI:
https://doi.org/10.51359/2526-7884.2025.263017Keywords:
credit, informal credit, revolving credit, financial education, consumption creditAbstract
This study aims to portray the profile of informal credit (fiado) users in Brazil and identify the characteristics and circumstances that influence the persistence of this practice in the current era. A multinomial logistic regression was used to model the preference for informal credit over formal revolving credit. The database was collected by the Bill & Melinda Gates Foundation with the support of the Central Bank of Brazil and contains a sample of 2885 families. The data show the magnitude and relevance of informal credit in Brazil, where 25% of individuals report having resorted to informal credit in the year prior to the survey, which is greater than the use of revolving bank credit. This study highlights the factors that explain the maintenance of this informal practice: the reduced capillarity of the formal financial system, the requirement of collateral, the low level of income, and the lack of financial education. The literature still does not explain the reasons for the persistence of informal credit today. The difficulty in obtaining data on informal credit markets does not allow for national and international academic research in this area. This study uses microdata to explain the dimensions and reasons for informal credit in Brazil.
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