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To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and results in banking under asymmetric information.

The review includes recently published or working papers (2006–2013) that exclusively employ experimental economics methodology, especially for studying the impact of formal or informal institutions on lending in credit markets.

The results of the reviewed experimental studies provide support for the important role of both informal (e.g., relationship banking and reputation) and formal (e.g., third-party enforcement; collateral) institutions and their impact on credit market performance, as well as the importance of studying the interaction of the two types of institutions.

The number of studies reviewed is fairly small but growing, indicating that this is the area of growing significance.

Controlled economic experiments are better able to address the questions regarding the direction of causality in empirical relationships. Economic experiments are particularly useful in studying complex markets like credit and capital and in eliciting specific effects of institutions on credit market performance. Such well-established empirical relationships will be able to provide guidance for policy making for financial market reform.

This is the first review of laboratory research in banking and lending under asymmetric information that aims to call attention to this area of research and serves as a starting point for an interested researcher and provide future direction.

The research aimed at explaining women microcredit repayment delay when loans are not granted on any joint liability group nor any other scheme based on social capital or financial collateral.

Previous research showed that greater female autonomy is associated with bearing fewer children and the former could be correlated to a higher loan repayment rate because of social and financial benefits for the household. Female autonomy proxied through the number of children and its square is regressed on the number of weeks of repayment delay in an OLS model as well as in a multilogit model that identifies borrowers according to their credit status (regular, delayed, and delinquent).

We found that more autonomous women, those bearing less than four children, repay credit more promptly and are less likely to switch into the delinquent credit status.

Economic variables need to be complemented with some specific characteristics of the borrower, as they have a role in explaining women’s repayment delay.

The research provides an alternate explanation about why women repay loans when a microcredit institution does not rely on a lending methodology based on joint liability groups.

Microcredit schemes fashioned after the Grameen Bank model are widely acclaimed for their potential for empowering the poor through access to credit based on social collateral. However, women market vendors in Ibadan refer to microcredit loans as owo komulelanta, a term which translates as “resting the breasts on a hot kerosene lantern,” a plain critique of the stringent conditions of loan repayment. This paper presents the lived experience of borrowers based upon ethnographic fieldwork conducted between 2017 and 2019. It reflects on the Nigerian state's neoliberal policies of microfinance and the experience of women borrowers. The paper argues that social–emotional vulnerability of women borrowers is exacerbated by the acceptance of a loan due to the rigid system of repayment and harassment from providers.

This chapter explores why a better alternative to current practises in addressing sovereign debt repayment problems has not emerged. It examines the discussions on financing and debt repayment difficulties from the first United Nations Conference on Trade and Development in 1964 to the eve of the 1980s debt crisis. Drawing from recent work that highlights the ways with which the power of economics and economists operates in the public realm, the chapter examines the role of economic analysis within the political debate on debt. The chapter details the repeated refusals by creditor groups to any suggestion for improvements to the international debt architecture.

This chapter examines the debt aversion of a group of college students who have the opportunity to take out a sizable, low-interest, non-credit dependent loan. If the loan is simply invested in low-risk assets, it would effectively yield a free lunch in net interest earnings.

The research uses survey data to examine demographic, socio-economic, personality traits, and other characteristics of those willing and unwilling to accept the loan offer, as well as their intentions of early repayment.

Individuals willing to accept the loan tend to have prior debt, longer planning horizons, come from middle-income families, and may have higher cognitive ability. Anticipated early repayment of the loan is more likely among those with prior investments, no prior debt, from STEM majors, with upper income parents, and those who expect to buy a home soon.

We find no consistent relationships between debt aversion and intellectual ability or gender, but this finding may be hampered by our small sample of female loan-rejecters. Our limited sample size also precludes examining interactions between the dimensions of personality types.

We suggest consideration of policies to encourage “smart” borrowing, focusing on the financially disadvantaged, particularly for education loans. This study examines a uniquely occurring natural experiment regarding the opportunity to accept a non-credit dependent loan. Our results describe the behavior of young adults, an infrequently studied yet important segment of the population, especially in the context of borrowing behavior.

Purpose: This chapter presents a discussion of the COVID-19 global debt crisis.

Methodology: The chapter uses the discourse analysis method to identify the cause of the COVID-19 global debt crisis and suggests ways to overcome the crisis.

Findings: The chapter argues that the high debt incurred by many countries during the COVID1-19 pandemic, combined with tightening global financial conditions, led to a significant increase in global debt. The author suggests ideas to avert a debt crisis. It was argued that rich countries could forgive the debt owed to them by heavily indebted countries or consider interest repayment holidays, debt-for-green swaps, or other debt-relief options. Heavily indebted countries can consider restructuring their debt, reevaluating their economic policy priorities, and raising taxes. Multilateral organisations can assist heavily indebted countries and engage in debt forgiveness advocacy.

Implication: There is a need for rich countries and creditor organisations to offer some relief to heavily indebted countries to help them meet their debt repayment obligations during and after the pandemic.

Originality: The chapter is one of the first to analyse the global COVID-19 debt situation.

In the past decade, microfinance institutions (MFIs) have experienced a boom in innovations of lending products, partly fueled by donors who see microfinance as the next promise to alleviate poverty. Examples of these new products are the combination of credit with health or life insurance, business and health education, savings products, and the adoption of (or conversion to) individual loan liability. The add-on features generally aim at reducing the vulnerability of clients while contributing to asset creation, hence improving repayment rates and the sustainability of the service. The product innovations typically result from organizations striving to extend outreach, increase impact, and promote sustainability. As in other industries, MFIs typically decide whether to adopt new strategies based on other MFIs’ success with the innovations. Many new microlending products and approaches continue to be developed. However, MFIs must generally rely on qualitative and descriptive case studies and anecdotal evidence on the effectiveness of these innovations to decide whether to implement the new strategies. The usual case study approach does not provide tangible evidence that can enable other organizations to know what changes can be expected if they were to adopt similar product changes.

After the end of the Napoleonic War, few issues of public policy dominated discussions in England as fervently as the issue of currency and the national debt. A time of civil unrest and social radicalisation, the circulation of ideas and pamphlets was prolific. The difficulties of post-war reconstruction sparked a long debate on issues of monetary reform and repayment of the national debt. The growth of national debt increased the size of the financial market and had important consequences for a changing class dynamic in domestic political affairs. The distributional aspects of the conflict were present, as was the satirical mockery of mishandling of public affairs. In much of the subsequent scholarship the organisation of taxation and expenditure, and the financial system and the issue of currency have been analysed as separate. This chapter brings them together. In particular, it focuses on Ricardo’s monetary thought and his views on public finance and contextualises them in light of his contemporaries.

This study contributes to the debate about the sustainability of Chinese loans in Africa. The literature suggests that economic growth is among other crucial debt dynamic indicators for assessing debt sustainability in the economy. However, this hypothesis has hardly been tested in the current case due to data ambiguities on Chinese loans to Africa. Following China Africa Research Initiative (CARI)'s initiative to ameliorate these data challenge, this study utilises CARI's dataset in a GMM panel VAR framework for the period (2000–2018) to explore the dynamic relations between Africa's growth and Chinese loans. The methodology is theoretically underpinned by the exogenous growth models that consider physical capital accumulation in the form of savings as a prime growth stimulus in the economy's production function. Thus, Chinese loans are typically viewed as physical capital input that directly adds to Africa's physical capital accumulation. It was found that Africa's growth responds positively to Chinese loans but only in the short run. In the long run, the effects of shocks to Chinese loans on Africa's growth phase out despite the inclusion of merchandise trade as a productivity factor in the model. The findings suggest that Chinese loans can boost Africa's growth through physical capital accumulation. Nonetheless, for growth to continue in the long run, these loans ought to be effectively invested in productive economic sectors that can generate productivity-enhancing economic incentives and enough savings for repayment. This initiative should be complemented by reforming institutions involved in acquiring, investing and servicing Chinese loans.

As students increasingly incur debt to finance their undergraduate education, there is heightened concern about the long-term implications of loans on borrowers, especially borrowers from low socioeconomic backgrounds. Drawing upon the concepts of cultural capital and habitus (Bourdieu & Passeron, 1977), this research explores how student debt and social class intersect and affect individuals’ trajectory into adulthood. Based on 50 interviews with young adults who incurred $30,000–180,000 in undergraduate debt and who were from varying social classes, the findings are presented in terms of a categorization schema (income level by level of cultural capital) and a conceptual model of borrowing. The results illustrate the inequitable payoff that college and debt can have for borrowers with varying levels of cultural resources, with borrowers from low-income, low cultural capital backgrounds more likely to struggle throughout and after college with their loans.