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How Costly is Social Screening? Evidence from the Banking Industry

Listed author(s):
  • Simon Cornee
  • Panu Kalmi
  • Ariane Szafarz

Social banks screen loan applicants by using both social and financial criteria, and social screening implies an extra workload. To check the costs involved in this type of screening we use balance-sheet information on European banks, and compare the operating costs of social banks with those of other banks. Surprisingly, our first results suggest that social banks’ costs are not significantly higher than those of their mainstream counterparts. Next, we uncover that the extra costs of social screening are offset by a cheaper workforce. Despite their need for specific screening, social banks are financially sustainable in a market dominated by for-profit institutions.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/259912/3/wp17026.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 17-026.

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Length: 16 p.
Date of creation: 23 Oct 2017
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/259912
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