Abstract
Previous research indicates that small-loan financing is a highly complex process, particularly when public sources provide financial support. This study applies propensity score matching to improve the effectiveness of closer inspection systems. Specifically, it compares before and after implementing propensity score matching (PSM) in terms of closer inspection and operational risk. It also examines similarities and differences among individuals’ demographics regarding the default rate of small business loans. Data pertaining to 589,648 Sunshine Loan debtors are utilized to address the research questions. Results indicate that the default rate with closer inspection is 5.5% lower than without closer inspection. Furthermore, the default rate with operational risk is dramatically lower (15.4%) than that without operational risk. The PSM approach presented here thus illuminates opportunities and challenges in three strategic areas: (1) management of public funds, (2) effectiveness of both closer inspection and operational risk, and (3) risk management for individual borrower types.
Highlights
Employee status for the closer inspection showed a 0.267 increase compared with other variables, whereas the bank variable for the operational risk showed a 0.032 increase
How can organizations engage in public finance decrease default rates and safeguard public funds? The approach presented here builds on the propensity score matching (PSM) framework [18]
The PSM approach presented in this study illuminates opportunities and challenges in three strategic areas: (1) management of public funds, (2) effectiveness of closer inspection and operational risk, and (3) risk management for individual borrower types
Summary
Citation: Rhee, W.W.; Ha, H.-Y. DoesPublic-Loan Management Matter for Sustainable Finance and OperationRisk? Sustainability 2022, 14, 1453.https://doi.org/10.3390/su14031453Academic Editor: Helen ChiappiniReceived: 16 December 2021Accepted: 25 January 2022Published: 27 January 2022Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.Licensee MDPI, Basel, Switzerland.Attribution (CC BY) license (https://
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