The transaction costs of lenders and borrowers in a Brazilian microcredit organization

One of the main obstacles for the expansion of microcredit availability is the high transaction costs of credit operations for both lenders and borrowers. In order to decrease transaction costs, institutions adopt the solidarity groups lending system in order to transfer transaction costs to the group, making it assume a large amount of the risk. However, in Brazil, there are several microcredit institutions, such as Banco do Povo-Crédito Solidário, Vivacred, and others, which still adopt the individual credit lending system, instead of the solidarity system, and there are hardly any studies about the transaction costs to either the institutions or the borrowers. The objective of this work is to investigate the transaction costs of short-term operations in Banco do Povo-Crédito Solidário in the city of Santo André and its outskirts.