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Credit Market Structure and Collateral in Rural Thailand
Author(s) -
Kislat Carmen,
Menkhoff Lukas,
Neuberger Doris
Publication year - 2017
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/ecno.12089
Subject(s) - collateral , collateralization , bond market , business , monetary economics , financial system , economics , finance
This paper empirically examines reliance on collateral in different credit market segments—formal, semiformal and informal lending—of a developing rural financial market. Determinants of collateralization indicate that all three types of lenders price risk conventionally. Controlled for standard risk factors, however, formal lenders rely on collateral about 40 per cent more often than informal lenders. The difference is explained by informal lenders’ better information on borrowers. This is shown by informal lenders’ behaviour: a longer lending relationship does not improve information about the borrower but shorter distance to the borrower does—the opposite applies to formal lenders, as predicted by theory.