Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/52474
Authors: 
Menkhoff, Lukas
Neuberger, Doris
Rungruxsirivorn, Ornsiri
Year of Publication: 
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

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