TY  - CHAP
AB  - Abstract Pledging collateral to secure loans is a prominent feature in financing contracts around the world. Existing theories disagree on why borrowers pledge collateral. It is even more challenging to understand why in some countries collateral coverage exceeds, for example, 300% of the value of a loan. This study looks at the association between collateral coverage and country-level governance and various institutional proxies. It investigates the economic implications of steep collateral coverage and sketches policy options to lower ex-ante asymmetric information and ex-post agency problems. Within this framework, should a lender collect the debt forcibly on default and liquidated assets fetch prices below outstanding loan values, the lender’s loss is covered through credit insurance, which would significantly reduce the need for steep collateral coverage. This proposal may increase level of private credit, investment and growth; particularly, in a number of developing countries where collateral spread is the main inhibitor of finance.
VL  - 96
SN  - 978-1-78441-027-8, 978-1-78441-026-1/1569-3759
DO  - 10.1108/S1569-375920140000096009
UR  - https://doi.org/10.1108/S1569-375920140000096009
AU  - Mathur Ike
AU  - Marcelin Isaac
PY  - 2014
Y1  - 2014/01/01
TI  - Unlocking Credit
T2  - Risk Management Post Financial Crisis: A Period of Monetary Easing
T3  - Contemporary Studies in Economic and Financial Analysis
PB  - Emerald Group Publishing Limited
SP  - 221
EP  - 252
Y2  - 2024/04/19
ER  -