What comes next for credit unions in Costa Rica? From financial repression to the risks of a new financial environment

Miguel Rojas
Sébastien Deschênes

Abstract: During the 1980s many developing countries started to dismantle policies constraining the financial sector. Those policies were adopted in order to channel resources to the manufacturing sector, as well as other sectors (infrastructure, commercial agriculture for export) considered as key for economic development. We argue that financial repression spurred the growth of credit unions (CUs) in Costa Rica. These organizations took advantage of the opportunity to expand their customer base by serving borrowers that were routinely refused access to credit to finance consumption when banks attained the cap for consumption set up by authorities.  Our article tackles a question of great social and economic importance, namely, have CUs in Costa Rica lost their overall competitiveness vis-à-vis other financial players in Costa Rica, after the liberalization of financial markets? If the answer is yes to this question, one would expect that the cooperative financial sector in Costa Rica and other developing countries can only be a marginal player in a financial sector that most likely will not return to the dirigiste policies of the past. We suggest avenues for future research on the topic.

JEL: G180

Keywords: General Financial Markets Government Policy and Regulation Credit Unions Financial repression

Télécharger / Download [1]

Retour à l'index [2]