Lending policies of informal, formal and semiformal lenders
Year: 2007
Type: article
Abstract: This paper compares lending policies of formal, informal and semiformal lenders with respect to household lending in Vietnam. The analysis suggests that the probability of using formal or semiformal credit increases if borrowers provide collateral, a guarantor and/or borrow for business‐related activities. The probability of using informal credit increases for female borrowers. It also appears that the probability of using formal credit increases in household welfare up to a certain threshold, but at a decreasing rate. In addition, the paper discerns the determinants of probability of default across lender types. Default risk of formal credit appears to be strongly affected by formal loan contract terms, e.g., loan interest rate and form of loan repayment, whereas default risk on informal loans is significantly related to the presence of propinquity and other internal characteristics of the borrowing household. Overall, the study raises several important implications for the screening, monitoring and enforcement instruments that may be employed by different types of lenders.
Source: Economics of Transition
Authors: Thi Thu Tra Pham, Robert Lensink
Institutions: University of Groningen, University of Nottingham
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2144653116