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Article
Publication date: 4 December 2017

Vijeta Singh and Puja Padhi

The purpose of this paper is to explore what determines the loan size/demand in a micro-finance group and makes comparative account of self-help groups and joint liability groups.

Abstract

Purpose

The purpose of this paper is to explore what determines the loan size/demand in a micro-finance group and makes comparative account of self-help groups and joint liability groups.

Design/methodology/approach

Using primary data and carried out survey (questionnaire and focus group discussion) for data collection. While for econometrics OLS regression has been used.

Findings

The study finds that employment, landownership and years spent by members in group has positive impact on loan demand by micro finance borrowers.

Research limitations/implications

This study points out the fact that economic variables along with group characteristics has positive implication on loan demand by borrowers.

Practical implications

This study would propel further research in group dynamics in micro-finance area.

Social implications

This study attempts to bring out the fact that economic position of micro-finance members along with its group status has bearing on its loan demand position.

Originality/value

The authors conducted this study using primary data, and all the collected data and study bring out the fact that older membership in groups are positive for loan demand by borrowers.

Details

International Journal of Social Economics, vol. 44 no. 12
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 3 April 2018

Vighneswara Swamy

The purpose of this study is to provide an econometric modeling of demand for bank credit and not only offer useful insights to the decision-makers in the public and private…

Abstract

Purpose

The purpose of this study is to provide an econometric modeling of demand for bank credit and not only offer useful insights to the decision-makers in the public and private sector but also support researchers and analysts in recognizing the determinants of lending in a major dynamic economic context.

Design/methodology/approach

This study addresses the “supply-versus-demand-puzzle” by using a demand relationship and model loan demand as a function of interest rates and economic activity that may also capture supply effects. Loan demand modeled as a function of interest rates and economic activity not only represents a demand relationship but also captures supply effects. Using the generalized methods of moments estimation, the estimations are made robust to heteroskedasticity and/or autocorrelation of unknown form. GMM–Time series (HAC) option extends the robustness by using the weighting matrix that is robust to the contemporaneous correlation of unknown form to the autocorrelation of unknown form.

Findings

In a bank-dominated financial system like India, lending rates play a significant role in the transmission of monetary policy, as well as triggering and controlling loan demand and thereby exercising a pervasive effect on the output in the economy. The estimates indicate that the elasticity of loan demand is largely determined by the lending rate (0.6) and the economic activity (0.688). For one percentage point increase in capital ratio, the loan spread would rise by 31.4 basis points, which in turn would cause an increase of 18.8 basis points in loan demand assuming that risk-weighted assets are unchanged.

Originality/value

This is the first of its kind studying a banking system dominated emerging economy. Second, this study is based on a rich data set covering the period from 1979 to 2012, than other papers did, to capture the long-run association involving credit booms and busts and, thus, helps in avoiding the problem of estimation spanning the dominance of either boom or the bust alone. With a newer approach for quantification of the impacts of new regulatory standards, this study offers novel insights for the estimation of lending spreads.

Details

Journal of Financial Economic Policy, vol. 10 no. 1
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 7 November 2016

Wilm Fecke, Jan-Henning Feil and Oliver Musshoff

The purpose of this paper is to empirically investigate the influencing factors of loan demand in agriculture. With the structural changes that agriculture is undergoing and the…

2164

Abstract

Purpose

The purpose of this paper is to empirically investigate the influencing factors of loan demand in agriculture. With the structural changes that agriculture is undergoing and the accordingly higher financing requirements and volumes, the analysis of loan demand in agriculture is of particular interest.

Design/methodology/approach

Detailed actual loan data at farm level, which is provided by a major German development bank for the agricultural sector, is used for the analysis. The data set covers the period from 2010 to 2014 and consists of 68,430 observations. Due to the data structure, an ordinary least square regression is conducted with the loan amount as the dependent variable. Many explanatory variables are included, such as the interest rate, the intended use of the loan, grace periods, the gross value added (GVA) and the business climate index for agriculture.

Findings

Amongst others, the authors find that interest rate, GVA, grace periods and farmers’ business expectations have significant effects on the loan demand in agriculture. According to the results, the interest rate has a significant negative effect, whereas the granted grace periods, the GVA in agriculture and farmers’ business expectations have significant positive effects on the loan demand.

Originality/value

This paper investigates the determinants of loan demand in agriculture in a developed country by using unique and comprehensive data at loan and farm level. Amongst others, elasticities of loan demand in agriculture are determined.

Details

Agricultural Finance Review, vol. 76 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 5 September 2016

Marc Cowling, Weixi Liu and Ning Zhang

The purpose of this paper is to investigate how entrepreneurs demand for external finance changed as the economy continued to be mired in its third and fourth years of the global…

16157

Abstract

Purpose

The purpose of this paper is to investigate how entrepreneurs demand for external finance changed as the economy continued to be mired in its third and fourth years of the global financial crisis (GFC) and whether or not external finance has become more difficult to access as the recession progressed.

Design/methodology/approach

Using a large-scale survey data on over 30,000 UK small- and medium-sized enterprises between July 2011 and March 2013, the authors estimate a series of conditional probit models to empirically test the determinants of the supply of, and demand for external finance.

Findings

Older firms and those with a higher risk rating, and a record of financial delinquency, were more likely to have a demand for external finance. The opposite was true for women-led businesses and firms with positive profits. In general finance was more readily available to older firms post-GFC, but banks were very unwilling to advance money to firms with a high-risk rating or a record of any financial delinquency. It is estimated that a maximum of 42,000 smaller firms were denied credit, which was significantly lower than the peak of 119,000 during the financial crisis.

Originality/value

This paper provides timely evidence that adds to the general understanding of what really happens in the market for small business financing three to five years into an economic downturn and in the early post-GFC period, from both a demand and supply perspective. This will enable the authors to consider what the potential impacts of credit rationing on the small business sector are and also identify areas where government action might be appropriate.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 22 no. 6
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 29 April 2014

Enjiang Cheng and Abdullahi D. Ahmed

The purpose of this study is to examine the demand for credit and credit rationing conducted by formal, informal and emerging microfinance lenders in the four poor counties of…

1207

Abstract

Purpose

The purpose of this study is to examine the demand for credit and credit rationing conducted by formal, informal and emerging microfinance lenders in the four poor counties of China.

Design/methodology/approach

This paper extends the existing studies on credit rationing in rural China by comparing the determinants of credit rationing by three different lenders, the formal lenders rural credit cooperatives (RCCs), the informal lenders and the new microfinance institutions (MFIs).

Findings

MFIs are capable of reaching out to the even poorer households if they develop the loan products based on the income and expenditure flows of these households.

Research limitations/implications

The determinants of credit rationing by three types of institutions are estimated separately.

Practical implications

RCCs in China shall change their policy of discrimination against female-headed households. RCCs shall also simplify the loan application procedures and assess the clients based on their repayment capacities rather than the age or assets alone. RCCs could learn from MFIs to use incomes from migrant workers as a criterion to assess the loan applicants.

Social implications

gender equity for loan access.

Originality/value

This paper extends the existing studies on credit rationing in rural China by comparing the determinants of credit rationing by three different lenders, the formal lenders (RCCs), the informal lenders and the new MFIs.

Details

China Agricultural Economic Review, vol. 6 no. 2
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 14 September 2010

Felipe Ruiz‐Moreno, Antonio Ladrón‐de‐Guevara and Francisco Mas‐Ruiz

The main objective of this paper is to propose a model that allows the detection of the competitive pattern of the Spanish loans market between 1992 and 1996.

Abstract

Purpose

The main objective of this paper is to propose a model that allows the detection of the competitive pattern of the Spanish loans market between 1992 and 1996.

Design/methodology/approach

In order to achieve this objective, the paper estimates, following the New Empirical Industrial Organization paradigm, a conjectural variation model for the strategic marketing dimension of price. The model proposed allows the measurement of strategic group‐level rivalry while simultaneously considering demand, costs, and profit specifications for each bank.

Findings

The findings evidence a high degree of competition between the firms within the same strategic group. Further, the demand for loans of a firm has a positive (negative) relationship with the rivals' price (own price), with the own branch network (rivals' branch network), and with the economic activity in the regions where firm operates.

Research limitations/implications

The major limitation of this research could become from the necessity to operate with detailed information that the authors try to overcome using proxies of several non‐available variables.

Originality/value

The model proposed herein represents a contribution to previous works and also provides more information about banking competition in the sense that it estimates price competition between firms within three strategic groups.

Details

International Journal of Bank Marketing, vol. 28 no. 6
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 29 October 2020

Rong Kong, Yanling Peng, Nan Meng, Hong Fu, Li Zhou, Yuehua Zhang and Calum Greig Turvey

In this study, the authors examined demand-side credit in rural China with the aims of understanding attribute preferences and the willingness of farmers to pay for credit.

Abstract

Purpose

In this study, the authors examined demand-side credit in rural China with the aims of understanding attribute preferences and the willingness of farmers to pay for credit.

Design/methodology/approach

The authors implemented an in-the-field discrete choice experiment (DCE) using a D-optimal block (6 × 9 × 3) design applied to 420 farm households across five Chinese provinces (Shandong, Sichuan, Shaanxi, Jiangsu and Henan) in the summer and fall of 2018. The DCE included six attributes including the interest rate, term of loan, type of loan, type of repayment, type of institution and mobile banking services.

Findings

Conditional and mixed logit results indicated a downward sloping credit demand curve with variable elasticity across regions. Provincial willingness-to-pay (WTP) indicators suggested that farmers were willing to pay a premium for long-term ( 0.03–0.687%) and low collateral credit loans ( 0.79–2.93%). Also, four of five provinces indicated a preference for loan amortization rather than lump-sum payment. Interestingly, in comparison to the Agricultural Bank of China (ABC), only farmers in Shandong, Sichuan and Shaanxi indicated a preference for rural credit cooperatives (RCCs)/banks and the Postal Savings Bank of China (PSBC). Another quite surprising result was bank services, in our case, access to mobile banking did not appear to induce WTP for agricultural credit. While conditional and mixed logit regression coefficients were similar (and therefore robust), the authors found that there was substantial heterogeneity across attribute preferences on term of loan, type of loan and amortization. Preferences for type of lender and mobile banking were generally homogenous. This result alone suggested that lenders should consider offering a suite of credit products with different attributes in order to maximize the potential pool of borrowers. While there were some differences across provinces, farmers appeared to be indifferent to lenders, and it did not appear that offering banking services such as mobile banking had any bearing on credit decisions.

Research limitations/implications

This paper presents a first step in using in-the-field choice experiments to better understand rural finance in China. Although the sample size satisfies conventional levels of significance and rank conditions, the authors caution against attributing results to China as a whole. Different provinces have different institutional structures and agricultural growing conditions and economies and these effects may differentially affect WTP for credit. Although by all indications farmers were aware of credit, not all farmers, in fact a minority, actually borrowed from a financial institution. This is not unusual in China, but for these farmers, the DCE was posed as hypothetical. Likewise, the study’s design was based on a generic credit product typical of rural China, and the authors caution against making inferences about other products with different attributes and risk structures.

Social implications

This study is motivated by the rapidly changing dynamic in China's agricultural economy. With specific reference to new laws and regulations about the transfer of land use rights (LURs), China's agricultural economy is undergoing significant and rapid change which will require better understanding by policy makers, lenders and practitioners of the changing credit needs of farmers, including the new and emerging class of commercial farmers.

Originality/value

To the best of the authors’ knowledge, the authors believe that the result provided in this paper present the first use of in-the-field DCE and are the first to be reported in either the English or Chinese literature on rural credit product design.

Details

China Agricultural Economic Review, vol. 13 no. 2
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 13 July 2021

Marc Cowling, Weixi Liu and Elaine Conway

Using ethnicity as our point of focus, the authors consider the dynamics of the demand for bank loans, and the willingness of banks to supply them, as the UK economy entered the…

763

Abstract

Purpose

Using ethnicity as our point of focus, the authors consider the dynamics of the demand for bank loans, and the willingness of banks to supply them, as the UK economy entered the COVID-19 pandemic in early 2020 with a particular focus on potential behavioural differences on the demand-side and discrimination on the supply-side. In doing so we directly address crisis induced financial concerns and how they played out in the context of ethnicity.

Design/methodology/approach

Using the most recent ten quarterly waves of the UK SME Finance Monitor survey the authors consider whether ethnicity of the business owner impacts on the decision to apply for bank loans in the first instance. The authors then question whether ethnicity influences the banks decision to meet or reject the request for a bank loan.

Findings

The authors’ pre-COVID-19 results show that there were no ethnic differences in loan application and success rates. During COVID-19, both white and ethnic business loan application rates rose significantly, but the scale of this increase was greater for ethnic businesses. The presence of government 100% guaranteed lending also increased general loan success rates, but again the scale of this improvement was greater for ethnic businesses.

Research limitations/implications

The authors show very clearly that differences in the willingness of banks to supply loans to SMEs relate very explicitly to firm specific characteristics and ethnicity either plays no additional role or actually leads to improved loan outcomes. The data is for the UK and for a very unique COVID time which may mean that wider generalisability is unwise.

Practical implications

Ethnic business owners should not worry about lending discrimination or be discouraged from applying for loans.

Social implications

The authors identify at worst no lending discrimination and at best positive ethnic discrimination.

Originality/value

This is one of the largest COVID-19 period studies into the financing of ethnic businesses.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 29 no. 3
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 2 May 2017

Evgeniy M. Ozhegov

This paper aims to examine the heterogeneity of preferences of mortgage borrowers of Russian state-owned suppliers of residential housing mortgages.

Abstract

Purpose

This paper aims to examine the heterogeneity of preferences of mortgage borrowers of Russian state-owned suppliers of residential housing mortgages.

Design/methodology/approach

Analysis takes into account the underwriting process and the choice of contract terms of all loans originated from 2008 to 2012. The data set contains demographic and financial characteristics for all applications, loan terms and the performance information for all issued loans by one regional bank which operates government mortgage programs. The paper uses a multistep semiparametric approach to estimate the determinants of bank and borrower choice controlling for possible heterogeneity of preferences, sample selection and endogeneity of contract terms.

Findings

The study found that the demand of low-income households who are unable to afford to improve the housing conditions by other instruments than government mortgage is less elastic according to the change both in interest rate and maturity compared with higher-income households.

Social implications

Given lower elasticities of the demand, the low-income group of borrowers has higher potential cost of loan and is usually rejected by commercial banks. The presence of the Agency of Housing Mortgage Lending special programs with subsidized interest rate for special constrained categories (young families, teachers, researchers etc.) widens the access for housing conditions’ improvements as a part of housing affordability government program.

Originality/value

The main contribution to the literature is modeling choice of contract terms as interdependent by the structural system of simultaneous equations with heterogeneous marginal effects.

Details

Journal of European Real Estate Research, vol. 10 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

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