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Collateral requirements of SMEs: The evidence from less-developed countries

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  • Yaldız Hanedar, Elmas
  • Broccardo, Eleonora
  • Bazzana, Flavio

Abstract

This paper aims to investigate the determinants of collateral requirements for loans that are extended to small and medium-sized enterprises in less-developed countries. Our primary data source consists of the results from firms in Eastern Europe and Central Asia from the Business Environment and Enterprise Performance Survey, which is compiled by the World Bank and the European Bank for Reconstruction and Development. The results show that borrower-specific variables are more important than country-specific variables in determining collateral requirements on loan contracts. The strongest evidence in our paper emphasises the importance of borrower risk and loan cost in collateral determinants.

Suggested Citation

  • Yaldız Hanedar, Elmas & Broccardo, Eleonora & Bazzana, Flavio, 2014. "Collateral requirements of SMEs: The evidence from less-developed countries," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 106-121.
  • Handle: RePEc:eee:jbfina:v:38:y:2014:i:c:p:106-121
    DOI: 10.1016/j.jbankfin.2013.09.019
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    More about this item

    Keywords

    Collateral; SMEs; Loan conditions; Two-part models;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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