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Exploiting the Unbanked: Evidence from Singapore's Unlicensed Moneylending Market

Author

Listed:
  • Leong, Kaiwen

    () (Nanyang Technological University, Singapore)

  • Li, Huailu

    () (Fundan University)

  • Xu, Haibo

    () (Fudan University, China)

Abstract

Using a unique dataset covering the borrowing behaviour of over a thousand borrowers, we study the unlicensed moneylending market in Singapore. In this market, borrowers search for lenders, and lenders decide how much profit to extract from borrowers. Lenders harass borrowers into compliance. We observe that different lenders apply different markups on different borrowers. Higher markups discourage borrowers from repeatedly borrowing from a particular lender. Increased enforcement specifically targeted at reducing the number of lenders in this market will increase markups, but will not deter borrowers from becoming recurrent borrowers because they have fewer lenders to choose from.

Suggested Citation

  • Leong, Kaiwen & Li, Huailu & Xu, Haibo, 2018. "Exploiting the Unbanked: Evidence from Singapore's Unlicensed Moneylending Market," IZA Discussion Papers 11786, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11786
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    More about this item

    Keywords

    illegal lending; enforcement; markup;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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