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The purpose of this paper is to estimate the effectiveness of the credit evaluation system using the borrowing data from China’s leading P2P lending platform, Renrendai.com.

The current credit valuation systems are classified into the forward-looking mechanism, which judges the borrowers’ credit levels based on their uploaded information, and the backward-looking mechanism, which judges the borrowers’ credit levels based on their historical repayment performance. Probit models and Tobit models are used to examine the effectiveness of credit evaluation mechanisms.

The results show that only the “hard” information reflecting borrowers’ credit ability can explain the default risk on the platform under the forward-looking credit evaluation mechanism. The backward-looking credit evaluation mechanism (BCEM) based on the repeated borrowings produces both promise-enhancing and “fishing” incentives and thus fails to explain the default risk, and weakens the effectiveness of forward-looking credit indicators in explaining the default risk because it encourages borrowers to invest in forging forward-looking credit indicators. Additional information such as the interest rate and the repayment periods reveals borrowers’ credit and thus can also be used as a predictor of borrowers’ default risk.

The findings suggest that current ex ante screening based on the information collected from the borrowers or repeated borrowings is inadequate to control the default risk in P2P lending markets and thus needs be improved. Ex post monitoring and sharing on defaulter’s information should be strengthened to increase the default cost and thus to deter potential bad borrowers.

To the authors’ knowledge, this is the first paper classifying the credit evaluation system in online P2P lending market into the forward-looking type and the backward-looking type, which is important since they provide different incentives to borrowers. The paper also investigates and provides evidence on the promise-enhancing and “fishing” incentives of BCEMs.

The purpose of this article is to examine the effects that dynamic incentives and the borrowing histories of clients of informal lending institutions have on loan repayment performance, in particular, the extent to which multiple borrowing and progressive lending affect the repayment of loans.

The paper uses a data set of 835 borrowers drawn from an informal lending institution in Tanzania. Descriptive analysis and econometric models are used to test the developed hypotheses.

Whereas clients with multiple loans are associated with poor loan repayment, progressive lending contributes to positive repayment outcomes. Multiple borrowers face increased debt levels and thereby an increased inability to meet their repayment obligations; in contrast, progressive lending by building up a lender–client relationship helps clients to obtain higher loans with a minimum amount of screening.

This was a cross-sectional study based on a sample of individual clients drawn from a single institution. However, since the majority of clients had also taken out loans with other financial institutions, the sample is considered to be representative.

A client’s past repayment performance and multiple loan history must be assessed so that multiple borrowing can be prevented and credit absorption capacity can be gauged more accurately. The repeated nature of the interactions and the threat to cut off any future lending (if loans are not repaid) can be exploited to overcome any information deficit.

This study was conducted in a context in which the degree of information sharing was low and institutional access to clients’ credit histories was limited. It contributes knowledge on how lenders minimise the risk flowing from the ex ante information gap and moral hazards arising from the ex post information gap.

To improve the loan repayment performance (LRP) of microfinance banks (MFBs) in Pakistan, this study aims to look at the direct impact of multiple borrowing (MB) on LRP and client-business performance (CBP), as well as the direct impact of CBP on LRP. The moderating function of pandemic factors in the relationship between MB and CBP, as well as the mediating effect of CBP in the association between MB and LRP, was also investigated in this study.

A questionnaire was used to obtain data from 531 lower-level workers of microfinance institutions (MFIs) for the study. The respondents were chosen using stratified sampling, which divided the target population into four influential groups: lending officers in agriculture, lending officers in businesses, lending officers in gold loans and lending officers in salary loans. In this study, a two-stage structural equation modeling approach was used, including a measurement model (outer model) and a structural model (inner model). The validity and reliability of the questionnaire were investigated using the measurement model (outer model), whereas PLS-SEM bootstrapping was performed to test the hypothesis and find the relationship among different underpinning constructs by using the structural model (inner model).

The outcomes of this study demonstrate that MB has a direct impact on CBP, and that CBP has a direct impact on LRP. MB, on the contrary, had no direct and significant impact on LRP in this study. The idea that CBP mediates the relationship between MB and LRP, as well as the moderating effect of pandemic factors on the relationship between MB and CBP, is supported by this research.

Until now, the influence of MB on LRP via the mediating role of CBP and the moderating role of a pandemic factor in the setting of Pakistani MFBs has received little attention. During the COVID-19 pandemic, this research also aids MFBs in better understanding MB and its impact on LRP. Furthermore, based on the findings of this study, Pakistani MFIs can enhance their LRP by implementing new lending regulations, particularly with reference to MB and the COVID-19 pandemic.

In order to improve the assessment of current lending policies for a microfinance institution (MFI) in Azerbaijan, the purpose of this paper is to analyse how lending conditions are adjusted based on knowledge gains during the loan relationship, with particular attention to delays in previous loans. Moreover, the paper examines what a lender can pre-determine from its own collected repayment records of clients. In addition, the repayment performances and lending policies between agricultural and non-agricultural clients are differentiated.

The analyses are based on a rich data set of an Azerbaijani MFI. For determining the influence of previous delays on the volume rationing in the following loan, the authors apply a generalized linear model. Subsequently, the probability of recidivism is analysed by means of a logit model.

The results confirm a positive relationship between delays in previous loans and repayment problems in present loans, which is increased by the severity of the previous delay. With respect to consequences, it is shown that the borrower with previous delays faces an increase in loan volume rationing in the subsequent loan. Moreover, the authors find that the consequences of previous delays do not differ significantly between farmers and other clients.

Until now, the consequences of repayment delinquencies in microfinance lending relationships have hardly been investigated. This study enhances the understanding of lending policies in microfinance by focussing on relationship aspects and by simultaneously differentiating between farming and non-farming clients.

The prevalence and drawbacks of policy borrowing in teacher education are widely acknowledged. In England, there has been extensive use of research conducted in the United States as justification for a prescriptive approach to teacher education nationwide. This raises questions about evidence borrowing from different contexts as a key facet of policy making, with inherent concerns about how the contextual influences on that research influence its effectiveness in transitioning to new spaces. Through the use of spatial theory, this chapter examines this phenomenon and highlights how inferences made from research undertaken in one context, but applied in another, can be detrimental to the established practices and expertise of teacher educators.

The purpose of this paper is to analyze a market for microfinance in a region of a developing nation in which all projects are either of high or low quality. There is adverse selection because only borrowers know whether their project is of high or low quality but the microfinance institutions (MFIs) do not. The MFIs are competitive, risk neutral, and they offer loan contracts specifying the amount to be repaid only if a borrower's project makes a profit. Otherwise, this borrower defaults on his contract.

A game theoretic model is used that explicitly accounts for adverse selection and then a study is made of the trinity of adverse selection, loan default, and self‐financing.

First, in the pooling equilibrium, a borrower with a low‐quality business project will obtain positive expected profit. In contrast, this borrower will obtain zero expected profit in the separating equilibrium. Second, for small enough values of the probability p that a business project is of high quality, MFIs will not finance any business project in the pooling equilibrium. Third, the cost of sending a signal is not too high and hence a separating equilibrium exists. Finally, under some circumstances, self‐financing can be used to mitigate adverse selection related problems

This paper studies a model with only two types of business projects. In addition, no allowance is made for repeated interactions between borrowers and MFIs.

This paper usefully shows that under some circumstances, a credible signaling device such as self‐financing can be used to mitigate adverse selection related problems that routinely plague interactions between poor borrowers in developing countries and MFIs.

The purpose of this paper is to investigate the relationships between business risks and credit choices of 400 farm households surveyed in Shaanxi province in October 2007 in the Yangling district. More specifically, this paper investigates whether or not rural farm households in China balance business risks from agricultural production with financial risk from the use of debt.

The data were collected through a survey of 400 farm households in Shaanxi province conducted in October 2007. Four separate regressions are run using a credit measure as the dependent variable and measures of profitability, risk, risk aversion, and demography, and debt source (formal versus informal lending) as independent variables.

The model shows evidence of risk balancing. That is, there is strong evidence that Chinese farmers reduce credit use and financial risk, as business risks increase.

The results suggest that Chinese policy makers could encourage the use of finacial leverage and prudent debt use by offering risk reducing programs such as crop insurance, weather insurance, or price insurance.

This paper uses a unique survey form to collect production risk data as well as gather information on credit use and sources. Data were collected so that risk measures could easily be computed using a triangular distribution. Furthermore, this is believed to be the first empirical validation of the risk balancing hypothesis.

To study a range of options for providing equity finance (equity capital) in social enterprises.

The UK government’s keenness for social enterprises to overcome the sector’s cultural aversion to borrowing and seek finance for their activities and end grant dependency within the sector is discussed. Considers the different motives of ethical investors and the potentially blurred boundary between what constitutes a social enterprise and what constitutes a private enterprise. Reports on how the Community Interest Companies (CICs), which provides the legal format for social enterprises, has adapted its regulations to pave the way for new forms of equity finance for social enterprises.

It is possible to adapt the rights of ownership identified by Jeff Gates (1998) to provide the basis for equity finance for social enterprises through its attention to liquidation rights, income rights, appreciation rights, voting rights, and transfer rights.

Clarifies some of the aspects involved in equity finance to reveal the potential of this type of finance for social enterprises.

Service captivity is described as the experience of constrained choice whereby a consumer has no power and feels unable to exit a service relationship. This study aims to explore how positive service experiences can contribute to service captivity in the alternative financial services (AFS) sector for consumers experiencing financial vulnerability.

A total of 31 interviews were undertaken with Australian consumers of payday loans and/or consumer leases.

The authors reveal a typology of consumers based on their financial vulnerability and their experience with AFS providers. Then they present three themes relating to how the marketing practices of these providers create a positive service experience, and, in doing so, can contribute to service captivity for consumers experiencing financial vulnerability.

The benefits derived from positive service experiences, including accessible solutions, self-esteem, and a sense of control over their financial situation, contribute to the service captivity of some consumers, rendering alternative avenues less attractive.

AFS providers must ensure a socially responsible approach to their marketing practices to minimize potentially harmful outcomes for consumers. However, a systems-level approach is needed to tackle the wider issue of financial precarity. Policymakers need to address the marketplace gaps, regulatory frameworks and social welfare policies that contribute to both vulnerability and captivity.

This research extends the understanding of service captivity by demonstrating how positive service experiences can perpetuate this situation. Further, specific solutions are proposed at each level of the service system to address service captivity in the AFS sector.

The purpose of this paper is to examine whether corporate social responsibility (CSR) activities of the firm affect poor captive consumers’ repurchase intentions, and whether or not CSR activities may moderate established relationships that drive repurchase intentions.

A survey was administered to 201 poor microfinance borrowers at the bottom of the pyramid in India in a cross-sectional field study format. Multivariate regression is used to examine relationships between CSR and repurchase intention.

All else being the same, CSR activities aimed at the borrowers’ communities affects repurchase intentions positively even among poor captive borrowers. Further, positive perceptions of CSR to some extent mitigate the negative impact of the dissatisfaction on repurchase intentions. Unmarried borrowers, mostly female, were more moved by CSR impressions compared to their married counterparts.

Future research could identify other aspects of demographic differences in borrowers, and capture more about attitudes toward CSR and motivations for borrowing. Longitudinal study can establish causality that cannot be inferred from this cross-sectional field study. More diverse locations and organizations would offer wider generalizability. It will be interesting to examine if poor and captive customers would care about CSR activities even when such activities are targeted at recipients unrelated to them or their communities.

The dynamics of CSR in poor captive consumer communities are somewhat novel. Microfinance context makes it even more so as the borrower is both a client and a recipient of CSR simultaneously. Results suggest that like well-off consumers, poor and captive customers also care about dissatisfaction and CSR.