Informal loans in Russia: Why not to borrow from a bank?

Research paper by Maria Semenova, Victoria Kulikova

Indexed on: 27 Sep '16Published on: 23 Sep '16Published in: Review of Pacific Basin Financial Markets and Policies


Review of Pacific Basin Financial Markets and Policies, Ahead of Print. After the 2008 crisis, the Russian consumer loan market shows high growth rates, accompanied by the quality deteriorating even faster. In the same time, a great proportion of households are not attracted by the banks and borrow informally. In this paper we aim to learn why households refuse to become bank clients, using the data from a 2009–2010 national survey of Russian households. Our results suggest that household’s choice of the informal credit market is based not only on credit rationing, but also on a lack of financial literacy, credit discipline and trust in the banking sector as a whole.