Using a dataset of more than 38 million consumer-bank relationships in 518 districts of Southern Peru, we find that first-time borrowers receive credit and better loan terms from the bank where their families are more central. Our results are explained by informal-oriented banks using family ties as a strategy toward the unbanked. They give first credits to retain the relatives of the recipients as clients, and they also screen first-time borrowers using the credit behavior of their relatives.

This paper studies how interconnected plants distribute additional liquidity from banks through the supply chain. Using a spatially segmented bank branch expansion rule in India, we find that direct exposure to additional bank credit allows plants to hold less precautionary cash and increase bank debt. Directly exposed plants pass through liquidity to customer plants as short-term trade credit. This liquidity spillover improves sales, employment, and productivity at customer plants. Structural estimation yields an average credit multiplier of 1.48. Our results underscore the credit multiplier effects of production networks and the importance of financial integration among firms with limited banking services.