Collateral and Lending to Rural Households in Emerging Markets

Konferenzbeitrag

This paper examines the role of collateral in the rural credit market of an emerging country. Due to opaque information and weak enforcement, the need for collateral is expected to be high. However, rural households usually lack adequate assets to pledge as collateral. How is this puzzle solved? Using data from Thailand, we find that indeed most loans are provided without any tangible assets as collateral. Lenders can enforce collateral-free loans through third party guarantees and borrower-lender relationships, but also through reducing loan size, reducing duration or increasing the interest rate. We do not find a significant impact of borrowers' wealth and default risk on the use of collateral.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Macroeconomic Problems of Asian Economies ; No. G1-V1

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: Other
• Subject: informal financial institutions ; microfinance ; relationship lending

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Menkhoff, Lukas ; Neuberger, Doris ; Rungruxsirivorn, Ornsiri
• Event: Veröffentlichung
• (who): Verein für Socialpolitik
• (where): Frankfurt a. M.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/37313
• Last update: 10.03.2025, 11:43 AM CET