Bank Capital Adjustment Process and Aggregate Lending

Duprey, Thibaut; Lé, Mathias

doi:10.2139/ssrn.2469146

Cited by 12 publications

(14 citation statements)

References 53 publications

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“…In the existing empirical literature, researchers have modeled lending behavior as a function of supply and demand factors. As one of the main supply-side determinants of lending behavior, several empirical studies establish that capital matters in credit decision of financial institutions consistent with the capital crunch hypothesis (Thibaut and Mathias, 2014;Covas, 2016;Gambacorta and Shin, 2018). The capital crunch hypothesis implies that financial institutions with higher capitalization increase loans, while those with poor capitalization limit their lending in order to fulfill capital requirement.…”

Section: Literature Reviewmentioning

confidence: 91%

“…The existing literature shows that several studies examined the drivers of lending behavior using empirical data from the banking industry in the United States (Berrospide and Edge, 2010;Karmakar and Mok, 2013), Italy (Cucinelli, 2016;Michelangeli and Sette, 2016), European Countries (Laidroo, 2012;Thibaut and Mathias, 2014), 90 countries worldwide (Igan and Pinheiro, 2011), the eleven G10 countries plus those of Austria, Australia, and Spain (Gambacorta and Shin, 2018) and Nigeria (Olokoyo, 2011). While the prior studies provide useful insights mainly on the effects of capitalization, portfolio risk and/or business cycle on loan supply in the banking industry, studies on the determinants of lending behavior in microfinance institutions are virtually missing.…”

Section: Microfinance Institution Lending Behavior 1745mentioning

confidence: 99%

“…This article contributes to the literature on lending behavior in at least three ways. First, previous studies focused on bank lending behavior (Berrospide and Edge, 2010;Thibaut and Mathias, 2014;Covas, 2016;Gambacorta and Shin, 2018). To our knowledge, this study is the first comprehensive study to examine the determinants of credit growth of MFIs by incorporating MFI specific, macroeconomic and time invariant components.…”

Section: Microfinance Institution Lending Behavior 1745mentioning

confidence: 99%

“…Financial institutions' lending behavior is also a determinant of financial crises. Accordingly, numerous studies have examined the factors that influence the lending behavior of financial institutions (Berrospide and Edge, 2010;Thibaut and Mathias, 2014;Cucinelli, 2016;Gambacorta and Shin, 2018;Awdeh and El-Moussawi, 2021). However, these studies were based on empirical evidences from the banking industry, and similar studies from microfinance industry are virtually missing.…”

Section: Literature Reviewmentioning

confidence: 99%

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What drives microfinance institution lending behavior? Empirical evidence from Sub-Saharan Africa

Tehulu

2021

IJOEM

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PurposeWhile poverty alleviation is the first core goal of Sustainable Development Goals (SDGs), and microfinance institutions (MFIs) are considered important instruments for poverty alleviation in developing countries as they provide credit access to the poor, there is surprisingly little evidence of the drivers of the lending behavior of microfinance institutions. Hence, the purpose of this study is to identify the factors that influence the credit growth of MFIs in Sub-Saharan Africa (SSA).Design/methodology/approachThe study relies on unbalanced panel dataset of 130 MFIs operating across 31 countries in SSA during the period 2004–2014 constituting 546 useable observations. The study uses the Arellano-Bover/Blundell-Bond two-step generalized method of moments (GMM) Windmeijer bias-corrected standard errors to estimate the models.FindingsThe results confirm that while capitalization, liquidity and size are positively associated with credit growth, profitability negatively impacts credit growth; whereas, other MFI specific factors namely portfolio quality, deposit growth and nondeposit borrowing growth have little direct effects on MFI credit growth. The results also show that MFI credit growth is pro-cyclical but negatively related to GDP per capita consistent with the theory of convergence. On the other hand, inflation and employment are not important covariates in the credit growth of MFIs.Practical implicationsThe findings suggest that if MFIs improve their liquidity and size by attracting more deposits and nondeposit borrowings, among others, they can increase credit access to the poor. Moreover, since the lending behavior of MFIs is not resilient to GDP shocks, different measures are needed to increase the financial stability of the microfinance industry. In this respect, since MFI capitalization is positively associated with credit growth and MFI credit growth is pro-cyclical, the findings provide useful insights to central banks/regulatory authorities and the Basel Committee as to the need for a counter-cyclical capital buffer requirement in the microfinance industry.Originality/valueThe study is the first comprehensive study to examine the drivers of MFI lending behavior as an extension to lending behavior models from the banking industry.

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Section: Literature Reviewmentioning

confidence: 91%

Section: Microfinance Institution Lending Behavior 1745mentioning

confidence: 99%

Section: Microfinance Institution Lending Behavior 1745mentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

What drives microfinance institution lending behavior? Empirical evidence from Sub-Saharan Africa

Tehulu

2021

IJOEM

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“…See e.g Duprey and Lé (2014). for recent application to bank capital adjustment dynamic.13 Computations were carried out with Stata.…”

mentioning

confidence: 99%

Main Determinants of Profit-Sharing Policy in the French Life Insurance Industry

Borel-Mathurin¹,

Darpeix

Guibert

et al. 2018

Geneva Pap Risk Insur Issues Pract

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We use a brand new data-set built from French supervisory reports to investigate the drivers of the participation rates served on euro-denominated life-insurance contracts over the period 1999-2013. Our analysis confirms practitioners' insight on the alignment with the 10-years French government bond, yet we show that on aggregate, insurers serve less than this target. Our data indicate that financial margins are more strictly targeted than participation. We find evidence that lapses are fairly uncorrelated with participation, suggesting other levers to pilot surrenders. If higher asset returns can imply better yield for policyholders, riskier portfolios do not translate into better participation.

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