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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/52474
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| Title: | | Collateral and its substitutes in emerging markets' lending  |
| Authors: | | Menkhoff, Lukas Neuberger, Doris Rungruxsirivorn, Ornsiri |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Monetary Policy and International Finance 3585 |
| Abstract: | | Due to opaque information and weak enforcement in emerging loan markets, the need for collateral is high, whereas borrowers lack adequate assets to pledge as collateral. How is this puzzle solved? We find for a representative sample from Northeast Thailand that indeed most loans do not include any tangible assets as collateral. Instead, lenders enforce collateral-free loans through third-party guarantees and relationship lending, but also through modifying loan terms, such as reducing loan size. Guarantees are the relatively most important substitute, they reduce collateral requirements independently of relationship lending and they are more often used by formal financial institutions. |
| Subjects: | | lending financial institutions collateral guarantees relationship lending |
| JEL: | | G21 O16 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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