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The purpose of this paper is to examine to what extent and in what forms loan applications from small and medium‐sized enterprises (SMEs) in a risk averse banking environment can be assessed defensively by lending officers (LOs). The paper also identifies triggering mechanisms behind defensive SME loan assessment behaviour and its' possible effects on the bank and the LOs.

The paper relies on a case study of a major Swedish commercial bank undergoing strategy and control system change during the recent financial crisis. The empirical evidence was collected through interviews with 76 LOs in three branch offices and a focus group interview session.

In a risk averse banking environment, LOs can be prone to assessing SME loan applications defensively to a noteworthy extent. Such defensiveness comes in different forms: denial of loan applications, granting of loans with collateral or high interest rates, or granting of loans only to clients with most of their financial affairs in the bank. External and internal mechanisms jointly trigger defensive loan assessment behaviour. The possible effects include fewer Type II errors and more Type I errors for the bank, while LOs avoid change and blame.

Overall, this study contributes to the literature by revealing triggering mechanisms, forms and effects related to the multifaceted construct of defensive loan assessment behaviour among LOs in a commercial bank, who handle applications from SMEs.

The aim of the paper is to analyse female and male loan officers' (LOs) risk aversion as they assess different types of small- and medium-sized enterprises' (SMEs) loan applications.

The data were gathered from a sample of 75 Swedish LOs, using the repertory grid technique and related questions. The data were analysed statistically.

The findings demonstrate that female LOs focus more on collateral (used as a proxy for risk aversion) in their evaluations of first-time loan applications than male LOs. However, the findings also suggest that there are no significant differences between the two groups as far as risk aversion when they evaluate additional loan applications. The other variables controlled for (age, tenure, insight, education, and location) did not significantly affect the LOs' risk aversion.

The study might have benefited from the use of complementary data collection approaches. Access to actual assessment and decision-making procedures could have increased the understanding of female and male LOs' attitudes toward risk.

The findings suggest that by the use of female-male LO teams, banks may achieve more balanced assessments of SMEs' loan applications.

To the authors' knowledge, the literature has not explicitly addressed risk aversion among female and male LOs with respect to different types of bank loans. Moreover, the authors investigated risk aversion in the context of standardised assessments procedures used to reduce exposure to credit risk.

Housing micro‐finance is emerging globally as an important financial activity to help alleviate the housing needs of economically vulnerable people. Micro‐finance institutions (MFIs) planning to include housing product must carefully assess whether they have the management and technical capacity to do so. The purpose of this paper is to give practical guidance to MFIs in adopting the housing programme, in addition to their existing line of micro‐finance services.

The paper gives practical guidance to MFIs adopting the housing programme in addition to the existing line of micro‐finance services and inputs about any market study, profiling the customers, product design, pricing of the product, affordability of the clients, income assessment, loan assessment, operational procedures, risk coping mechanisms and technical backup guidance.

The paper finds that MFIs should also ensure that housing micro‐finance suits their strategy from institutional and financial perspectives.

This paper provides valuable practical guidance to MFIs.

With exclusive data from a commercial microfinance institution (MFI) in Madagascar, the purpose of this paper is to investigate if loan officer rotation (change of loan officer) has an effect on credit access (loan approval) in rural and in urban areas. The authors further analyze how the frequency of loan officer rotation affects credit access in rural and in urban areas.

The authors apply propensity score matching to compare credit access between loan applicants who experienced loan officer rotation and loan applicants who experienced no loan officer rotation in rural and in urban areas.

Results show that loan officer rotation has a positive and statistically significant effect on credit access. The authors observe further that loan officer rotation has a different effect on credit access in rural and in urban areas. Whilst rural loan applicants who experienced loan officer rotation are more likely to have credit access, urban loan applicants show no statistically significant effect of loan officer rotation on credit access. For the frequency effect on credit access, the authors observe that one loan officer rotation has a positive and statistically significant effect on credit access whereas results are mixed for two loan officer rotations.

Even though the authors can show that loan officer rotation can improve credit access to loan applicants, especially in rural areas, the conditions in Madagascar are unique. Therefore, results need to be verified in other countries and institutional contexts.

From the perspective of MFI, the authors recommend that the management of MFI needs to provide better tools to loan officers to improve on the evaluation of agricultural loan products or standardize the assessment of agricultural loan products to improve on lending decisions. Further, if applicable, the authors recommend that MFI should consider using credit worthiness assessment procedures which rely less on loan officer’s judgment for loan evaluation, such as automated systems. From the perspective of loan applicants, the authors recommend that loan applicants should request for a change of loan officer if they experience successive loan applications rejection.

To the authors’ knowledge, this paper is the first to provide empirical evidence on the effect and frequency of loan officer rotation on credit access in Sub-Sahara Africa, and Madagascar, in particular.

Using a unique dataset of a commercial microfinance institution (MFI) in Tanzania, the purpose of this paper is to investigate first whether agricultural firms have a different probability to get a loan and whether their loans are differently volume rationed than loans to non‐agricultural firms. Second, the paper analyzes whether agricultural firms repay their loans with different delinquencies than non‐agricultural firms.

The authors estimate a Probit‐Model for the probability of receiving a loan, a Heckman‐Model to investigate the magnitude of volume rationing for all loan applications and an OLS‐Model to examine the loan delinquencies of all microloans disbursed by the MFI.

The results reveal that agricultural firms face higher obstacles to get credit but as soon as they have access to credit, their loans are not differently volume rationed than those of non‐agricultural firms. Furthermore, agricultural firms are less often delinquent when paying back their loans than non‐agricultural firms.

Even if the authors can show that access to credit and loan repayment is different for agricultural firms, the current regional focus of the MFI only allows for lending to agricultural firms in the greater Dar es Salaam area. Thus, these results might change in a rural setting. Besides general differences of the rural economic environment, the production type of agricultural firms might also differ in rural areas. Also, these results might change in different country contexts.

The findings suggest that a higher risk exposition typically attributed to agricultural production must not necessarily lead to higher credit risk. They also show that the investigated MFI overestimates the credit risk of agricultural clients and, hence, should reconsider its risk assessment practice to be able to increase lending to the agricultural sector. In addition, the results might indicate that farmers qualify less often for a loan as they do not fit into the standard microcredit product.

To the authors' knowledge, this is the first paper which simultaneously investigates access to credit and the repayment behavior of agricultural firms.

Investigates the lending needs of the self‐employed and of micro‐based businesses. Describes the lack of coherence between the evaluative criteria used in traditional lending models and the needs of business owners. Findings suggest that the standard “5 C” model for assessing the viability of loan applications does not meet the needs of the present business environment. Women business owners may be at a disadvantage when applying for a business loan as the supposedly “objective” criteria are applied in a “subjective” manner to the detriment of female entrepreneurs. Presents information on the characteristics of micro‐loan programmes and proposes a market approach to micro‐loan practices that is better adapted to changing finance opportunities.

This paper reviews studies that have examined how accounting information impacts commercial lending judgments. Issues discussed involve the usefulness of accounting data in lending decisions, effects of different accounting methods on lenders’ judgments, bankruptcy and default judgments, and decision processes pertaining to the use of accounting information in lending decisions. Additionally, the paper reviews the research on how audits and other forms of assurance influence commercial loan officers’ judgments. Topics include the way perceived auditor independence influences loan officers’ judgments, the impact of financial statement audits and audit opinions on lending decisions, how internal control reports and other CPA firm reports influence loan decisions, ways in which audit report disclosures and wording impact lending decisions, how perceived auditor quality affects lending decisions, and the effects of limited assurance engagements on loan officers’ judgments.

The purpose of this paper is to analyze recent findings in the research on bankers' lending decision making, to merge relevant findings in psychology and economics and create a comprehensive review of the literature.

The authors used a systematic article search for empirical studies when conducting the research.

The findings are analyzed on the basis of human decision‐making research. The results of the review are three conclusions about loan officers' decision making: their dependency on bank characteristics, their decision‐making biases, and their deliberate and intuitive reasoning approaches.

The paper's findings are important, both as a summary of the literature on lending decision making and also as a foundation for future research.