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Title:Collateral and Lending to Rural Households in Emerging Markets PDF Logo
Authors:Menkhoff, Lukas
Neuberger, Doris
Rungruxsirivorn, Ornsiri
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Macroeconomic Problems of Asian Economies G1-V1
Abstract:This paper examines the role of collateral in the rural credit market of an emerging country. Due to opaque information and weak enforcement, the need for collateral is expected to be high. However, rural households usually lack adequate assets to pledge as collateral. How is this puzzle solved? Using data from Thailand, we find that indeed most loans are provided without any tangible assets as collateral. Lenders can enforce collateral-free loans through third party guarantees and borrower-lender relationships, but also through reducing loan size, reducing duration or increasing the interest rate. We do not find a significant impact of borrowers' wealth and default risk on the use of collateral.
Subjects:informal financial institutions
relationship lending
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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