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In developing countries credit markets screening and monitoring costs be higher for banks than informal lenders...

In developing countries credit markets screening and monitoring costs be higher for banks than informal lenders due to market segmentation.

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In developing countries, the market is highly segmented and fragmented as well. It makes banks to incur higher cost to reach out to audience in different segments to cater the bigger set of customers. It involves, setting up network, sending teams for verification and documentation as well. It will increase the cost. Though, informal lenders work in small areas and they know people in their areas. So, it becomes less costly to operate in smaller segment for them as they know people, their credit history via their own local network. So, it is less costly for them.

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