The role of demographics in small business loan pricing

Neuberger, Doris; Räthke-Döppner, Solvig

doi:10.1007/s11187-014-9602-4

Cited by 31 publications

(22 citation statements)

References 60 publications

(48 reference statements)

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“…Menkhoff et al (2012) examined the issue of collateral in the context of less-developed country (Th ailand) and show that there is a positive relationship exists between pledging collateral and access to credit. Neuberger and Rathke-Doppner (2015) also found similar results in the German market and conclude that when fi rms pledge collateral, it increases access to credits from banks. On the other hand, there is empirical research those do not fi nd any relationship between pledging collateral, and access to credits (Kundin and Erecgovac, 2011;Ono and Usegi, 2009).…”

Section: Literature Reviewsupporting

confidence: 61%

Collateral and SME financing in Bangladesh: an analysis across bank size and bank ownership types

Rahman

Ključnikov

2016

Journal of International Studies

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Abstract.We examine the issue of pledging collateral and its eff ect on access to credit, interest rates and credit risk of SMEs fi nancing in Bangladesh with respect to bank size. We also examine the collateral classifi cation (fi xed assets collateral, personal guarantee and third-party guarantee) by bank ownership types to fi nd what types of collateral are preferred by public, private and foreign banks in Bangladesh for lending to fi rms. In addition to that, we examine whether collateral requirements are diff erent between large and small banks as they have diff erent incentives for collateral based lending. Our empirical results suggest that small banks have no additional incentives to provide loans based on the collateral security than large banks. Hence, we did not fi nd any evidence that collateral can increase access to credit for SMEs from small banks. Similarly, we also did not fi nd any eff ect of collateral on interest rates or collateral security can lower the default rates of the SME loans and the results are similar regardless bank size. With regards to collateral segmentation across bank ownership types and bank size, our regression's results suggest that each type of banks has its own preferences about collateral requirements while lending to fi rms. Th erefore, we conclude that depending on bank internal policy commercial banks ask for diff erent collateral, which comply with the best interests of banks.Keywords: Bank Financing, Collateral, Small and Medium Enterprises, Bank Size, Bank Ownership, Credit Risk, Bangladesh. JEL classifi cation: G21, G32, L26, O16Received: December, 2015 1st Revision: January, 2016 Accepted: June, 2016 DOI: 10.14254/2071-8330.2016 Collateral and SME fi nancing in Bangladesh: an analysis across bank size and bank ownership types Rahman A., Rahman M.T., Ključnikov A. (2016)

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Section: Literature Reviewsupporting

confidence: 61%

Collateral and SME financing in Bangladesh: an analysis across bank size and bank ownership types

Rahman

Ključnikov

2016

Journal of International Studies

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“…Hsiao and Chou (2015) show that experienced borrowers can manage businesses more efficiently than inexperienced borrowers manage and minimize the credit risk of loans. Neuberger and Rathke-Doppner (2015) find that younger borrowers pledge higher collateral due to the lack of business experience compared to older, more experienced borrowers. Grunert and Norden (2012) argue that a skilled and experienced borrower has more bargaining power with banks and, therefore, it is possible to relax strict credit terms such as interest rate.…”

Section: Firm Characteristicsmentioning

confidence: 76%

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Rahman

Belás

Klieštik

et al. 2017

Journal of Business Economics and Management

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Abstract. The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (SMEs) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012-2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for SMEs. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

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“…Entrepreneurs with an immigration background are more often denied credit than natives (Bruder, Neuberger, and Räthke-Döppner 2011). Young entrepreneurs have to pay higher loan rates than older ones because of lacking liquidity and smaller businesses (Neuberger and Räthke-Döppner 2015). Female entrepreneurs apply less often for bank loans due to fear of rejection and are more often denied credit than male entrepreneurs (Stefani and Vacca 2014).…”

Section: Financial Inclusionmentioning

confidence: 99%

Financial Inclusion, Regulation, and Education in Germany

Neuberger

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The author would like to thank Naoyuki Yoshino, Ganeshan Wignaraja, Peter Morgan, Udo Reifner, and Stefanie Lämmermann for helpful discussions, and Lisa Düngel for valuable research assistance.The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractGermany's bank-based financial system provides a high level of financial inclusion, measured by bank outreach and use of financial services. However, the most vulnerable individuals and small enterprises in Germany tend to be excluded or credit constrained. The quality of financial inclusion is impaired by a low level of financial literacy, which is also concentrated among specific population subgroups. The high level of financial inclusion can be attributed to relationship lending by public savings banks, credit cooperatives, public promotional banks, and guarantee banks using the "housebank" model, and financial consumer protection and credit reporting regulations and institutions. Programs involving microfinance institutions have been stopped. Financial inclusion of consumers with the aim of responsible finance may be improved by implementing the right to a basic bank account with an overdraft facility and protection against attachment, establishing public credit bureaus, redirecting banking regulation toward the protection of borrowers in long-term credit relationships, and stren...

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The role of demographics in small business loan pricing

Cited by 31 publications

References 60 publications

Collateral and SME financing in Bangladesh: an analysis across bank size and bank ownership types

Collateral and SME financing in Bangladesh: an analysis across bank size and bank ownership types

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Financial Inclusion, Regulation, and Education in Germany

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