Loan Officer Turnover and Credit Availability for Small Firms

This paper presents empirical evidence on the role loan officers play in facilitating small firm access to commercial bank loans. If loan officers use soft information (for example, assessments of character, information from customers and suppliers) to make lending decisions that would not otherwise be made on the basis of hard information (for example, tax returns or financial statements), then, frequent turnover in loan officers should be associated with an adverse effect on credit availability. This relationship is confirmed empirically using survey data of U.S. small firms in 1995 and 2001, where loan officer turnover is positively related to the turndown rate on the most recent loan application. Although loan officer turnover could be influenced by the turndown rate (for example, an owner changes banks and gets a new loan officer as a result of a recent turndown), its negative effect on credit availability persists under several different tests.     

Accounting information quality and trust as determinants of credit granting to SMEs: the role of external audit

This study analyses whether loan officers’ perception of the accounting information quality (AIQ) and the trustworthiness of SMEs are associated with a better willingness to grant them credit. Empirical evidence is obtained from a survey of 471 bank loan officers in Spain, who are asked to answer in relation to audited and not-audited firms. Using a Structural Equation Modeling (SEM) approach, the results obtained confirm that the loan officers’ willingness to facilitate SMEs’ access to credit is positively influenced by their general perception about the AIQ, but only if it is audited. In the case of not-audited firms, AIQ does not play a direct role in credit granting decision, but is relevant in trust formation. Besides, in the case of audited firms, only the “competence” dimension of trust is relevant, whereas in not-audited firms, both “competence” and “honesty” have an impact on credit granting. “Benevolence” does not have an influence in any case. The study has implications for SMEs, banks, policy makers and auditors.     

Lending Risk in MFIs: The Extreme Bounds of Microeconomic and Macroeconomic Factors

Using 1,234 microfinance firms in 106 countries, this study investigates the determinants of default on the microcredit debt obligation of borrowers. Using the variant of extreme bounds analysis that systematically tests the fragility of coefficient estimates, we examine the importance of 42 variables in explaining default risk. At the micro level, the results from the modeling of model uncertainty reveal that regulation, cost per loan/cost per borrower, loan balance, borrower per loan officer, and the number of loan officers are robust factors. From the macroeconomic context, the time required to start a business and human capital are the determinants of default on debt obligations.     

The challenges of supporting necessity entrepreneurs: Understanding loan officer exit in microfinance

Necessity entrepreneurship can serve as a pathway out of poverty for low-income individuals, with microfinance often providing important financial support. Yet the relational lending strategies common among microfinance institutions may influence loan officer turnover and, in turn, compromise entrepreneurs' access to credit. While there is some reason to suspect that relational lending with poor entrepreneurs will increase retention, we propose that serving the poor may make loan officers more likely to quit: loan officers in commercial microfinance institutions are unlikely to have strong commitments to poverty alleviation and may be taxed by the challenging fieldwork associated with lending in poor areas. Qualitative and quantitative data from a microfinance bank in Latin America support our expectations, showing that exit becomes more likely when loan officers' work involves more poor clients and that the effect is strongest when such work demands intensive fieldwork in low-income areas. Supplementary analyses of trends across the global microfinance industry demonstrate that poor clients have a stronger impact on exit in for-profits than non-profits, suggesting that prosocial motives among non-profit employees may have a buffering effect. Overall, our study reveals how providing services to necessity entrepreneurs can have negative, unexpected consequences for frontline employees.     

商业银行信贷组合管理及其模型构建问题的探讨

商业银行信贷风险管理的发展是从最初的对单笔贷款管理到把全部贷款看成一个组合加以管理,这是因为组合可以使得风险分散化。现代组合管理的理论(MPT)基础是从Harry Markowitz的分散化理论开始的,然而标准的组合模型应用在贷款组合时会存在诸多的问题。有效的信贷模型应满足建立信贷风险模型等方面的要求。     

Does Mood Affect the Efficiency of Credit Approval? Evidence from Online Peer-to-Peer Lending

Using a large dataset obtained from “Paipaidai,” an online peer-to-peer lending platform in China, we examine whether credit officers’ mood affects the efficiency of credit approval from a perspective of individual decision-making. Refering to studies in psychology and financial economics, we employ season, temperature and weather as mood proxies, and control the variables related to the quality of the loan to study credit approval behavior under different mood conditions. The results suggest that the efficiency of credit approval by individual credit officers is significantly correlated with their mood—a positive mood improves efficiency, while a negative mood reduces it. Specifically, loans examined under better mood conditions (e.g., during spring, comfortable temperatures, and sunny days) have a significantly higher probability of approval, but a lower probability of default if approved; and those examined under poorer mood conditions show a lower probability of approval and a higher probability of default if approved. This effect of mood is even stronger when a loan application is more complex, atypical, or unusual to evaluate. Moreover, investor sentiment, denoted by closed-end fund premiums, has the same effect on credit approval as well.     

Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?

The financing of small and medium-sized firms is important for the catching-up of the East German to the West German economy since reunification. We explore whether it is restricted by unfavorable bank loan terms, using bank-survey data on lending decisions to small and medium-sized firms. A comparison of the terms of lending between the former East German and West German states yields a lending gap given by higher loan prices and collateral requirements in East Germany. This gap can be explained by differences in credit risks and lending strategies of banks.     

Microcredit: an answer to the gender problem in funding?

Microfinance institutions (MFIs) target people excluded from the traditional banking system. By providing start-up capital to these under-financed individuals, they enable a greater number of women to start their own business, particularly in sectors where initial capital requirements are high. Our study follows a portfolio of 3,640 microcredit applicants in France over the 2000–2006 time period, identifying MFI client profiles and bringing to light gender differences in borrowers compared to a wider sample of entrepreneurs. This study shows that the male–female gap found amongst company creators is also maintained amongst the clienteles of MFIs. Empirical results also suggest that gender is a decisive factor regarding the amount of credit provided to borrowers when comparing with other factors in the borrower and firm profile. Thus to a certain extent, MFIs are found to reinforce gender inequalities in France.     

Gender bias and the availability of business loans

Social structure, values, and gender socialization have undoubtedly disadvantaged women in the process of preparing for a career in business, and there is a widely held view that women are subject to discrimination by financial institutions. However, the “evidence” to verify this belief has largely been from studies where women have claimed that they were subject to discrimination in the loan situation, without either supporting evidence, or control data from a sample of male loan applicants.Two experiments were carried out, using a Goldberg type procedure, to test the belief that women are unfairly discriminated against when seeking a loan to establish a business venture. Carefully constructed scenarios of an application for loan finance to purchase a commercial enterprise were mailed to loan officers of major trading bank branches. The scenarios were identical in all respects except for the sex and education level of applicants. Loan officers were asked whether or not they would approve loan finance for the proposed business purchase and to indicate factors that contributed to their decisions.Significant differences in response to female and male applicants were observed in both experiments. In Experiment I (University education) both sexes were equally likely to obtain a loan, but “education” was considered a more important factor for the female applicant than for the male. In Experiment II (High school education) the female applicant was less likely to obtain a loan than the male applicant.The results support the widely held perception that women can experience gender discrimination when seeking start-up capital. Such discriminatory behavior by loan officers may not be, and probably is not, intentional. Rather, the pervasiveness of the social construction of differential gender roles in western culture is such that it is more likely that discrimination is unconscious, and consequently more difficult to change.     

西部农户小额信贷还款率影响因素分析

利用主成分分析方法和logistic回归模型,对西部地区小额信贷还款率影响因素进行实证分析。研究表明农户专业技能、信用等级、农户收入、贷款利率、贷款期限、贷款用途等因素与小额信贷还款率显著相关,农户年龄、受教育程度、贷款金额等因素对小额信贷还款率的影响不显著,不同因素在影响小额信贷还款率时具有重要次序性,农户专业技能、信用等级、农户收入、贷款利率、贷款期限、贷款用途、是否贴息、经营能力对小额信贷还款率的影响最为重要,其次为劳动力人数和耕地面积因素。     

Coercion in the selling of credit life insurance

Credit life insurance, which repays some or all of a borrower's outstanding debt in the event of death, has been a controversial subject for many years. Critics assert that, despite regulations that limit tied sales, pressure on loan officers to generate fee income through cross selling creates an incentive for coercion of borrowers. Allegedly, some sales techniques leave the consumer with the false impression that the purchase of credit insurance was necessary to obtain the loan. This article measures the frequency with which creditor efforts to sell credit insurance transform the sales message from persuasive to coercive. A methodology is developed for measuring the impact of coercive selling pressure applied to borrowers at the point of sale. Data used to measure the effect of coercive pressure are taken from an extensive survey of borrowers conducted during 1993. Not only are public policy concerns about coercion in the selling of credit insurance addressed, but more generally the article offers a methodology to quantify the influence of the customer's point-of-sale experience on the decision to purchase any financial service. © 1995 John Wiley & Sons, Inc.     

Fairness and microcredit interest rates: from Rawlsian principles of justice to the distribution of the bargaining range

This paper addresses the fairness of microcredit interest rates. Since microfinance institutions provide credit for the poor at relatively high prices, the fairness of their interest rates has been repeatedly debated. We first apply Rawls' principles of justice to the case of microcredit interest rates and suggest some limitations related to the hypothesis of rationality of the borrowers and the level of inequality. We then suggest another framework based on the analysis of the distribution of the benefits generated by the transaction to assess the fairness of interest rates. We conceptualize this as the distribution of the bargaining range between the borrowers' and the institutions' reservation price and discuss what these reservation prices could be in the context of microfinance.     

Trade credit and SME profitability

Financial literature discusses the motives for trade credit provision by suppliers in depth. However, there is no empirical evidence of the effect of granting trade credit on the profitability of small and medium-sized firms. We examine the profitability implications of providing financing to customers for a sample of 11,337 Spanish manufacturing SMEs during the 2000–2007 period. This article also examines the differences in the profitability of trade credit according to financial, operational, and commercial motives. The findings suggest that managers can improve firm profitability by increasing their investment in receivables and that the effect is greater for financially unconstrained firms (larger and more liquid firms), for firms with volatile demand, and for firms with bigger market shares.     

Lending technologies,lending specialization,and minority access to small-business loans

We investigate minority access to small-business loans using a probit model of loan application denial that recognizes two loan types (line-of-credit loans and non-line-of-credit loans) made by two lender types (commercial banks and nonbank financial institutions). We estimate our model on data from the 1998 Survey of Small Business Finances. We find evidence consistent with minority equal access to bank credit lines and nonbank non-line-of-credit loans in highly competitive loan markets; in less competitive markets we find evidence consistent with unequal access to these loans. We also find evidence consistent with unequal minority access to bank non-line-of-credit loans, regardless of loan market competitiveness. Our findings differ from previous research which treats small-business loans as a homogenous product and finds evidence consistent with unequal minority access to small-business loans generally. We argue that the existence of multiple small-business lending technologies and loan specialization by lenders account for our findings and demonstrate the need to treat small-business loans as a heterogeneous product when investigating equal access to small-business credit.     

我国农村小额信用贷款问题和对策

当前,我国现阶段农村小额信用贷款存在的问题,主要体现在农村金融信用环境差,农村小额信用贷款的风险多元化,农民还贷能力低,农村小额信用贷款期限和额度不合理,银行的内控机制不完善等方面。政府应从政策上重视农村小额信用贷款;积极引导农民的贷款投资方向,降低坏账率;制定优惠政策;增加贷款的透明度,从而切实解决农村小额贷款存在的问题。推动农村经济的发展。     

中小企业社会资本、信用水平与融资能

社会资本是一个近年来被引入经济学研究领域的概念,本文以中小企业社会资本为对象,运用结构方程模型分析社会资本、信用水平与融资能力之间的作用机制并得出研究结论。     

Trade credit and determinants of profitability in Europe. The case of the agri-food industry

The objective of this paper is to analyse the effect that trade credit has on the determinants of profitability during the crisis period in Europe. We use panel data for a total of 24,177 European agri-food companies from 2010 to 2014. Among our main contributions, we highlight that we isolate the sector effect and study the country effect by separating the different policies and customs with respect to the granting of trade credit. The results confirm, in general, that trade credit affects profitability depending on the country and the characteristics of size, specificity, market power or reputation.     

The effect of service quality on trust and commitment varying across generations

We examine the effect of service quality on consumer trust and commitment in the context of obtaining a financial loan and how these relationships vary across different generational cohorts. We find that the service quality offered by a loan officer has a significant effect on consumer trust towards a financial institution, which in turn influences consumer commitment to a financial institution for a future transaction. We also find that relative strengths of a few paths in the model differ across different age cohorts, indicating some generational variability in the relationship between service quality, trust and commitment.     

Credit Scoring and Loan Default

A metric of credit score performance is developed to study the usage and performance of credit scoring in the loan origination process. We examine the performance of origination FICO scores as measures of ex ante borrower creditworthiness using loan‐level data on ex post performance of subprime mortgages. Parametric and nonparametric estimates of credit score performance reveal different trends, especially on originations with low credit scores. The data suggest a trend of increased emphasis on higher credit scores accompanying a trend of increased riskiness in other origination attributes. Over time, this increased emphasis on credit scoring coincided with deterioration in FICO performance largely because of the fact that higher credit score originations of later cohorts were more likely to have riskier attributes. However, controlling for other attributes on originations and changes in economic conditions, we find that, as measures of borrower ranking, FICO performance on subprime loans over the years remains fairly stable.     

Small Business Borrowing and the Owner–Manager Agency Costs: Evidence on Finnish Data

This study investigates the impact that managerial ownership has on loan availability and credit terms. We find that managerial ownership is common in a sample of small and medium‐sized Finnish firms. Our results suggest that an increase in managerial ownership decreases loan availability. The results on loan interest rates suggest that though an increase in managerial ownership initially increases interest rates, the effect is reversed at higher levels of ownership. Collateral requirements increase monotonically with managerial ownership. Overall, the results suggest that banks view that there are agency costs involved with managerial ownership even in small and medium‐sized firms and that this is taken into account when lending to these firms.