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Information asymmetries and agricultural credit: Evidence from the pre-banking era in Lima, 1825-1865

Luis Felipe Zegarra (CENTRUM Católica Graduate Business School, Lima, Peru) (Pontificia Universidad Católica del Perú, Lima, Peru)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 6 November 2018

Issue publication date: 5 April 2019




The purpose of this paper is to analyze the functioning of the rural credit market of Lima from 1825 to 1865, paying special attention to the effect of information asymmetries on the access to rural credit.


The article relies on primary sources for the study of the early credit market of Lima. In particular, the study relies on a sample of notarized loans for 1825–1865 and on property tax reports, collected from the National Archives of Peru, to determine the effect of information asymmetries, collateral and regional lending on access to credit. The article also analyzes the legal system of Peru during this period to determine whether property rights were well protected and so collateral could be used in the rural credit market.


A revision of the legislation shows that the legal system had some deficiencies, but allowed landlords and tenants to use their assets as collateral. Tax reports show that landlords and tenants owned valuable capital that could be used as collateral. Evidence from notarized loans shows that information asymmetries severely restricted inter-regional lending. In Lima, however, notaries played a role as financial intermediaries, providing the information about potential borrowers and allowing landlords and tenants to access credit. As a result, access to credit was significant for landlords and tenants.


This paper is one of the few historical studies on the role of information asymmetries in the allocation of rural credit in Latin America. It contributes to our understanding of credit markets prior to the creation of banks.



The author acknowledges the assistance of Franco Lobo, María Gonzalez, Katherine Rojas, Jhosiel Falcón and Liz Córdova in the process of data collection. The author also thanks comments by attendants to the 2018 Annual Conference of the UK Economic History Conference at Keele and to a seminar in April 2018 in the Department of Economic History, Institutions, Politics and World Economy of the University of Barcelona, Spain. Funding for this study has been provided by CENTRUM Católica Graduate Business School.


Zegarra, L.F. (2019), "Information asymmetries and agricultural credit: Evidence from the pre-banking era in Lima, 1825-1865", Agricultural Finance Review, Vol. 79 No. 2, pp. 217-233.



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