IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Informal collateral and default risk: do 'Grameen-like' banks work in high-income countries?

Listed author(s):
  • Leonardo Becchetti
  • Maria Melody Garcia

We study collateralization strategy and effects on the ex post loan performance of a European 'Grameen-type' bank which mainly finances small firms or microfirms and seeks to reconcile economic sustainability with social goals. Our analysis on individual loan data documents that the bank has a remarkably low share of nonperforming loans in spite of an extremely high share of uncollateralized loans (around 42%). Econometric findings document that collateralization depends positively on ex ante borrower's risk (proxied by nonperforming past track record) and negatively on relationship lending. In this regard, the originality of the bank's policy is that of lending to small borrowers which belong to larger networks and consortia with which the bank has a long history of relationships. The incentive effect seems to work because collateralized borrowers are riskier ex ante, but not ex post.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.tandfonline.com/doi/abs/10.1080/09603107.2011.554368
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 21 (2011)
Issue (Month): 13 ()
Pages: 931-947

as
in new window

Handle: RePEc:taf:apfiec:v:21:y:2011:i:13:p:931-947
DOI: 10.1080/09603107.2011.554368
Contact details of provider: Web page: http://www.tandfonline.com/RAFE20

Order Information: Web: http://www.tandfonline.com/pricing/journal/RAFE20

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:21:y:2011:i:13:p:931-947. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.