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Access to Credit and the Expansion of Broadband Internet in Peru

This paper studies the effects of broadband internet on the credit market. After the rollout of the network, we show an improvement in the economic activity of those benefited areas: firms grow in terms of sales, and there are higher (lower) chances of entry (exit) of firms.

After observing these effects, we report an increase in credit for firms-banks with an ongoing relationship. Also, the probability of entry (exit) to the credit market increases (decreases). We can disentangle supply and demand effects, since there is a group of firms and bank branches with different locations and asymmetrical timing for the availability of the technology.

Our analysis highlights the importance of the demand channel in the reduction of the observed interest rates, which is consistent with the fact that our credit market results are concentrated among micro and small firms, and firms with thin credit files, which are often perceived as riskier. You can also download the DEBrief of this study here.

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