Relationship lending in Peru

This paper studies whether the strength of bank-firm relationships has an impact on credit conditions, particularly during a stress scenario such as COVID-19 crisis. Using the Peruvian credit registry, we find that firms get better credit conditions (higher credit line and loan size growth, lower interest rate growth) in the institution where they have a stronger bond, measured by years of relationship, geographical proximity to a branch and share of credit. Furthermore, those effects are stronger compared to a pre-COVID scenario and heterogeneous depending on firm characteristics. We also find a positive effect of our relationship lending indices on the probability of getting Reactiva loans and loan rescheduling, and on the growth rate of the number of employees.