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Does Public-Loan Management Matter for Sustainable Finance and Operation Risk?

Author

Listed:
  • Won Woo Rhee

    (Department of International Trade, Dongguk University-Seoul, Seoul 04620, Korea)

  • Hong-Youl Ha

    (Department of International Trade, Dongguk University-Seoul, Seoul 04620, Korea)

Abstract

Previous research indicates that small-loan financing is a highly complex process, particularly when public sources provide financial support. This study applies propensity score matching to improve the effectiveness of closer inspection systems. Specifically, it compares before and after implementing propensity score matching (PSM) in terms of closer inspection and operational risk. It also examines similarities and differences among individuals’ demographics regarding the default rate of small business loans. Data pertaining to 589,648 Sunshine Loan debtors are utilized to address the research questions. Results indicate that the default rate with closer inspection is 5.5% lower than without closer inspection. Furthermore, the default rate with operational risk is dramatically lower (15.4%) than that without operational risk. The PSM approach presented here thus illuminates opportunities and challenges in three strategic areas: (1) management of public funds, (2) effectiveness of both closer inspection and operational risk, and (3) risk management for individual borrower types.

Suggested Citation

  • Won Woo Rhee & Hong-Youl Ha, 2022. "Does Public-Loan Management Matter for Sustainable Finance and Operation Risk?," Sustainability, MDPI, vol. 14(3), pages 1-11, January.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:3:p:1453-:d:736258
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    References listed on IDEAS

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    1. Mina, Andrea & Minin, Alberto Di & Martelli, Irene & Testa, Giuseppina & Santoleri, Pietro, 2021. "Public funding of innovation: Exploring applications and allocations of the European SME Instrument," Research Policy, Elsevier, vol. 50(1).
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    4. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
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