Loan Collateral Research Articles

Concentrated bank market and SMEs’ collateral issues: a study of the firms of developing Asian countries

Collateral is a significant challenge for small and medium enterprises (SMEs) in acquiring formal credit. Bank market concentration can cause to increase collateral demand through enhancing bank market power. This study explores the relationship between bank market concentration and the collateral challenges faced by SMEs in accessing bank credit by employing a probit regression model. The analysis utilizes a sample of over 25,000 firms from 19 developing Asian nations. The datasets combine firm-level data sourced from the Business Environment and Enterprise Performance Survey (BEEPS) with country-level financial data obtained from the Global Financial Development Data (GFDD) which are provided by the World Bank. The results reveal a significant positive correlation between bank market concentration and the collateral challenges encountered by SMEs in developing Asian countries. In markets characterized by high levels of banking concentration, financial institutions tend to exhibit risk-averse behavior, manifesting in an increased propensity to demand collateral for both SME and large enterprise loans. Consequently, this heightened bank concentration exerts additional pressure on SMEs in acquiring bank credit. To foster an environment conducive to SME financing, countries with high levels of banking concentration should enact regulatory measures aimed at managing and constraining market concentration levels.

Firms' gender composition, loan collateral, and sustainable finance

This study evaluates gender gaps in the collateral requirements of bank loans using a sample of firms in Latin America. We measure firm-level gender composition through ownership and workforce, both of which are directly related to women's economic empowerment. Additionally, we evaluate the differences in the impacts of firms' gender composition on collateral borrowing between banks that adopt sustainable finance codes of conduct and those that do not. Our empirical findings indicate that female-dominant firms are less likely to be required to provide collateral for their bank loans, and when collateral is required, its value is relatively lower. However, banks adopting sustainable finance codes are not less likely to grant collateral loans to female-dominant firms; in fact, these banks even require greater collateral values from these firms. The implications derived from our empirical findings concern gender inequality in accessing financial credit in developing countries and underscore the need for designing sustainable finance codes that specifically consider and rectify the challenges faced by female-owned firms, especially by firms with a majority female workforce.

Design, simulation and feasibility of the innovative agricultural warehouse receipt system through dynamic programming and agent-based models.

To address marketing challenges in the agricultural sector, provide financial support for small-scale farmers over marketing seasons, manage price risks of agricultural products, and enhance the functioning of agricultural mercantile exchanges, it is attainable to implement an efficient and compliant warehouse receipt system (WRS) that aligns with the legal, institutional, social, and economic-financial conditions of a country. The aim of this study is to design, simulate, and assess the feasibility of an innovative WRS in the agricultural sector. To achieve this, a WRS was designed and evaluated for maize crop in Iran. The research methodology of this study is divided into three main parts: design, simulation, and feasibility assessment of the WRS. The design process incorporated the FAO-provided (2009) warehouse receipt system development, considering the experiences of various countries and the institutional and financial regulations specific to Iran. Additionally, a dynamic programming model was used to simulate the system, and an agent-based model was utilized for system feasibility assessment. The study results demonstrated that it is possible to design an innovative and efficient WRS by involving five key actors, including farmers, buyers (maize traders), banks, mercantile exchange market, and the warehouse (governmental institution), and establishing clear communications among them. Based on simulation results using dynamic programming model, it was evident that four parameters, namely the annualized loan interest rate, the valuation coefficient for loan collateral, price volatility of the product over the marketing season, and the warehouse cost-to-product value ratio, significantly impact the adoption of the WRS by farmers. In conclusion, the findings from the agent-based model revealed that setting the annualized loan interest rate at 8%, a collateral valuation coefficient of 85%, price fluctuations over the non-harvest time at 60%, and a warehouse cost-to-product value ratio of 2% can result in the participation of nearly 100% of farmers in the proposed WRS.

The effect of collateral on small business rationing of term loans and lines of credit

Theories of loan contracting in the presence of asymmetric information highlight the key role of collateral in mitigating against credit rationing. However, theory also allows for the use of collateral by ‘bad’ borrowers in order to receive better loan contract offers. In this study, we explore the extent to which collateral can affect the incidence of absolute loan denial and partial rationing associated with smaller loans than requested being offered. Using data from a large survey of UK small- and-medium enterprises, we find significant evidence on the negative effect of collateral. Our results also reveal important distinction between lines of credit and term loans, where the presence of collateral is associated with 3 % less term loan approved compared to overdraft. We argue that even the request (or offer) of collateral for a term loan indicates that either the bank or the firm believes it is a risky bet.

Unleashing India's inventive capital: intellectual property as loan collateral

ABSTRACT India's knowledge economy thrives on innovation, but financing such ventures requires alternatives to traditional tangible asset-based collateral. This paper explores the potential of intellectual property (IP) as a viable option. While challenges in valuation and enforcement exist, IP holds significant value. It is argued that IP acts as a two-pronged signal for lenders. Strong IP portfolios indicate a borrower's creditworthiness, while the potential loss of valuable IP discourages defaults. However, India's regulatory framework presents hurdles. Streamlining legal procedures, empowering financial institutions to assess IP value, and establishing centralised registries for recording security interests are crucial first steps. Risk mitigation strategies are equally important. Government-backed risk-sharing programmes and promoting IP insurance can incentivise banks and protect all parties. Finally, educating businesses about IP financing opportunities unlocks this avenue for securing funding. By addressing these challenges, India can create a robust environment for IP-based collateral, thereby fuelling economic growth and technological progress.

Intellectual Property as Business Loan Collateral: A Taxonomy of Institutional and Economic Determinants

Abstract As a promising strategy to secure debt financing, firms can use their intellectual property rights (IPR) as collateral. Despite an ongoing shift to a more technology-based economy, the collateralization of IPR is still trailing behind the use of more traditional asset classes. In this paper, we address the challenges and opportunities of using IPR as collateral from a legal and economic angle by also exploring the role of and consequences for IP law. We develop a new taxonomy, i.e., a classification of the key determinants of using IPR as collateral. The taxonomy defines two pillars that govern the use of IPR collateral that distinguish between institutional and economic determinants. The institutional determinants cover contract law, IPR registries, and banking regulations. The economic determinants constitute the influence of IPR characteristics on the trade-off between the economic costs and benefits of collateralizing IPR. We apply the derived taxonomy to the legal and economic status quo in several industrialized economies to identify potential impediments to IPR-backed debt financing. Taken together, our taxonomy can be viewed as providing guidance for future research in the fields of law and economics on IPR as loan collateral for businesses.

Financial Technology Revolution in India: An Appraisal

Role of artificial intelligence has increased tremendously in the field of finance. Traditional banking and financial players are challenged by technological start-ups with the help of services like international money transfer, online portfolio management, crowd funding platforms, and mobile payment solutions. To promote digital financial services in India main foundation stones are Unified Payment Interface (UPI), JAM trinity i.e. JAN-Dhan, Adhar and Mobile. So, to study FinTech revolution in Indian context this research article has been planned. Further, this paper has been divided into three parts to achieve two objectives. First objective is to study the evolution of FinTech worldwide, and its relationship with data science and artificial intelligence. Secondly, to analyse FinTech revolution, trends, problems and prospects in Indian Context. A descriptive research approach is adopted to examine FinTech Industry status in India. Various sources like research articles, papers, government reports, and websites have been considered to gather various data for this work. Further, chart and table has been used to explain data. For more precise explanation, a comparison has also been done with global trends. The study revealed some of the gap areas in Financial Inclusion in financially underserved India and these are low insurance penetration, lack of strong telecom network, lack of access to formal credit, lack of collateral for loans, building a cashless economy, low financial literacy, lack of acceptable identification, high brokerage cost and low penetration. Finally, the research article also highlighted the regulatory framework for FinTech industry in India.

‘Money does not stink’ – Accounting and slavery

This article supplements the multidisciplinary effort sparked by the New York Times's 1619 Project to focus attention on institutions and practices that supported American slavery. Managerial and financial accounting practices support many types of endeavours. Accounting is usually done for managers, investors, and creditors. Accounting practices supported investment in, and management of slavery, a fundamentally immoral and destructive practice. Accounting served the interests of the enslavers, not the enslaved. Accounting practices helped investors in slave voyages and absentee plantation owners overcome agency problems, facilitating investment. Plantations used accounting to track enslaved people's productivity. Accounting terms and reports dehumanised enslaved men and women, classifying them as assets and as loan collateral. Accounting forms and statements treated slave ownership and the use of slave labour as routine. In these ways, accounting statements helped normalise and legitimise the practice of slavery and helped distance investors and lenders from its brutal reality.

АНАЛІЗ ЕФЕКТИВНОСТІ МЕХАНІЗМУ ФІНАНСОВО-КРЕДИТНОГО ЗАБЕЗПЕЧЕННЯ АГРАРНИХ ПІДПРИЄМСТВ

Тhe main problems of stable development of enterprises of the real sector of the economy are related to the lack of own funds, limited state financial support and difficulty in raising capital in the securities market. The search for effective forms and methods of lending and prevention of credit risks determines the need to develop a modern mechanism of financial and credit support, which will include a set of methods, tools and levers to regulate the relations of real sector enterprises in the credit market. The main methods of this study are the systematic method, dialectical method, methods of analysis and synthesis, method of comparison, economic and statistical methods, tabular and graphical methods, method of generalization. The article is aimed at analysing the efficiency of the mechanism of financial and credit support of agrarian enterprises and substantiating practical proposals for improving lending to agrarian enterprises and prospects for its development. The article considers the main issues of the mechanism of financial and credit support and its impact on improving the efficiency of agricultural enterprises. The efficiency of credit support for agricultural enterprises is studied, the main banking products on the market over the past year are analysed. The main problems of lending to agricultural enterprises are identified, which include insufficient availability of credit products, preference for short-term lending, complete or partial absence of financial products for agrarians from banks, relatively high risk, difficulty in determining the volume and structural components of loan collateral, lack of credit history in most small and medium-sized agricultural enterprises, which ultimately limit the ability of agricultural enterprises to attract bank loans. The article provides proposals for improving the mechanism of lending to agricultural enterprises. Implementation of these proposals will help to eliminate the problems of credit provision of agricultural enterprises, namely: to increase the efficiency and transparency of the use of budget funds, to increase the volume of lending, to expand access to credit resources of agricultural enterprises, to increase the terms of lending, to reduce the fee for using loans.

Potential of Crypto Assets as Loan Collateral in Indonesia

This research reviews the potential for using crypto assets as loan collateral in Indonesia. By focusing on regulatory aspects, risks, benefits and stakeholder perceptions, this research analyzes how crypto assets can be used as collateral in loan transactions. A mixed methodology was used to gain a holistic understanding, encompassing both qualitative and quantitative analysis. The results highlight the legal complexities, protections, and need for more comprehensive regulations in facilitating the use of crypto assets as loan collateral in Indonesia

The Urgency of Using YouTube Channels as Loan Collateral: Orientation and Limitations from a Progressive Legal Perspective

This scientific article presents a comprehensive analysis of the legal regulations and progressive legal aspects associated with using YouTube channels as collateral in Indonesian businesses. In the digital era, the complexity of relevant laws and regulations necessitates a progressive legal approach to accommodate digital assets, copyright protection, and personal data security while considering their impact on business transactions. The primary objective of this research is to examine the legal framework concerning the use of YouTube channels as collateral in Indonesia. Employing a normative legal research methodology and a legislative and conceptual approach, this study delves into the legal framework. The source materials include legislation, court decisions, legal literature, and scholarly articles, utilizing in-depth document analysis for data collection and analysis. The results of this research shed light on the multifaceted legal regulations governing the utilization of YouTube channels as collateral, encompassing legislation, copyright protection, consumer rights, and social media regulations, emphasizing the importance of understanding rights and responsibilities, and consulting legal experts. From a progressive legal perspective, the use of YouTube channels as collateral mirrors the legal adaptation to digital assets, acknowledging their economic value but requiring careful consideration of limitations such as fluctuating digital asset value, ownership changes, copyright, and data privacy. The significance of individual rights, copyright protection, and data privacy must be safeguarded within progressive legal regulations. This study contributes to the legal discourse on digital asset usage in Indonesia, offering insights into the evolving legal landscape and its implications for digital business transactions and asset management. Highlights: Legal Complexity: The study explores the intricate legal landscape governing the use of YouTube channels as collateral in digital business transactions. Progressive Legal Adaptation: It highlights the need for progressive legal approaches to accommodate digital assets, copyright protection, and data privacy in the digital era. Rights Safeguarding: The research emphasizes the importance of upholding individual rights, copyright protection, and data privacy within the legal framework for digital collateral use. Keywords: YouTube Collateral, Legal Framework, Digital Business, Copyright Protection, Data Privacy

FOREIGN EXPERIENCE IN ASSESSING COLLATERAL FOR BANK LOANS: COMPARATIVE ANALYSIS OF APPROACHES IN THE USA, GERMANY AND UK

This paper is a thorough analysis of foreign experience in assessing collateral for bank loans. Focusing on examples from the US, Germany and the UK, the study reveals different approaches and strategies adopted in these countries. The article examines the key principles and methods of valuation, their advantages and disadvantages, as well as current challenges and prospects in the field of collateral valuation.

Examining Collateral Prerequisites for Small and Medium-Sized Business Loans

This paper examines the factors that affect loan collateral specifically for SMEs in Lebanon, which is a country with a small, open emerging market economy. Collateral should secure the bank loan, but in practice it is adjusted according to other socio-economic criteria of the firms. This is especially true for SMEs and even more so for emerging countries. We propose in this research to illustrate the signals mobilized by banks when granting secured loans. The data on these variables come from the Lebanese Central Bank and the World Bank. They contain observations for two samples - 532 firms for 2019 and 561 firms for 2013. A set of factors influence the level of collateral required: those related to firm characteristics (relevant variables: age, size, audit of financial statements, provision of training to workers, private shareholder ownership, quality recognition, experiencing at least one bribe request, female manager), manufacturing (reflects economic sector), interest rate (reveals loan characteristics), and location in the capital (reveals loan market characteristics). The logistic regression estimates suggest that collateral required by older firms is higher even that SMEs have financial statement revised annually by external auditors. Size and interest rate contribute to lower collateral requirements. The consistency of results in the combined panel, 2013, and 2019 shows the reliability of the Lebanese Banking Sector norms and policies

Analisis Yuridis Pelaksanaan Penghapusan Hak Tanggungan dan Akta Konsen Roya

In today's society, mortgage rights are said to be rights to grant land rights with collateral for loans made to banks. Mortgage rights as an agreement on the main collateral, namely the agreement on accounts payable. In order to get a certificate of legal certainty, the mortgage must be converted into a deed of granting the mortgage and registered at the land agency office and also paid off after the debt ends. Roya which is the removal of collateral for mortgage rights which are used as the principal mortgage rights, which have expired or been canceled due to the expiration of the loan by land registration at the request of the party concerned. The purpose of this study is to find out the Juridical Analysis of the Implementation of the Abolition of Mortgage Rights and the Roya Consent Deed using normative juridical research methods. The results and discussion obtained are to remove/delete the mortgage right, the land office signs the roya consent deed and the introductory document. The Roya consent deed must contain an encumbrance right in order to cross out the mortgage right for a requirement or document has been lost.

Pengaruh Pandemi, Restrukturisasi, Dan Pinjaman Agunan Terhadap Kepuasan Pengusaha Mikro PT Pegadaian Cabang Pringgan

This study was conducted at Pt Pegadaian Pringgan Branch. The purpose of this study was to examine the effect of the pandemic, restructuring and collateral loans on the satisfaction of microentrepreneurs at PT. Pringgan Branch Pawnshop. The approach in this study is a quantitative approach. This type of research is a quantitative descriptive research. The population was 250 personnel employees and the sample was 71 personnel employees. Sampling technique Using Simple Random Samplin. Data collection using questionnaires, interviews and documentation. Data analysis techniques using multiple linear regression análisis. The conclusion of this study states that the pandemic has a significant effect on the satisfaction of micro entrepreneurs fostered by PT Pegadaian where the Sig value is < 0.05. Restructuring significantly affect the satisfaction of micro entrepreneurs fostered by PT Pegadaian where the value of GIS <0.05. Collateral loans have a significant effect on the satisfaction of micro entrepreneurs fostered by PT Pegadaian where the Sig value is < 0.05. Simultaneously with the pandemic, restructuring and collateral loans had a significant effect on the satisfaction of microentrepreneurs fostered by PT Pegadaian, where the Sig value was < 0.05. Adjusted value of RSquare is 0.733 or 73.30%, meaning that the research variables contribute greatly in explaining the satisfaction of micro entrepreneurs fostered by Pt Pegadaian at 73.30% while the remaining 26.70% is influenced by other factors outside this study.
 Keywords: Collateral loans, Pandemic, Restructuring, Satisfaction of Microentrepreneurs.

The National Collective Management Institute (LMKN) as an Appraiser of Economic Value in the Binding of Music and Song Copyrights as Objects of Fiduciary Guarantees

One of the creations protected by copyright is songs and/or music. Legal protection for them is a necessity in order to create a conducive climate to the development of music industry in Indonesia. In order to facilitate song and/or music writers with better control over their works, they can appoint representatives to regulate the management of their royalty, in this case LMKN (The National Collective Management Institute). Law number 28 of 2014 concerning copyrights regulates that copyright can be used as an object of fiduciary guarantee. However, its use is still hampered by the fact that the economic value of music and song copyrights cannot be determined easily, especially if it is used for fiduciary guarantee. Most banks do not accept it for loan collateral. The objective of this research was to analyze the roles of LMKN as the determiner of the economic values of song and music copyrights for the purpose of binding them for objects of fiduciary guarantee. This normative study uses statutory approach, conceptual approach, analytical approach, and futuristic approach. The determination of the economic values of song and music copyrights can be done by LMKN, a one- stop service institution that collects the royalty of music and song in Indonesia. The National Collective Management Institute (hereinafter briefly referred to as LMKN) as an institution that can provide an appraiser of the economic value of Music and Song Copyrights. The use of SILM (a music and song information system and data center) can help the estimation of music and song’s economic value based on the royalty accepted by the art’s creator or copyright holder. The amount of royalty can determine the binding of music and song copyrights for the objects of fiduciary guarantee.

Data Valuation Model for Estimating Collateral Loans in Corporate Financial Transaction

The importance of data assets as intangible corporate assets is being emphasized as more business activities based on digital technology are being carried out. This study proposes the development of a data valuation model that can enable companies to use data assets as collateral for loans in financial transactions. To this end, a model was designed with a focus on the cost approach, which is less likely to involve arbitrariness and error among other valuation model approaches. Furthermore, a model simulation was conducted after securing transaction data of a Korean secondhand marketplace provider. Among the total costs of this marketplace provider, the cost of using data reflecting the ratio of data activities was derived, focusing on financial statements and tangible and intangible assets for the last five years. The data asset acquisition costs were derived, and the data replacement costs were calculated by reflecting the past price and wage growth rates. The results revealed that simulation companies could use a total of KRW 26.8 billion worth of data as collateral for a loan. Accordingly, the data valuation model developed in this study will contribute to reinforcing the value of corporate data assets and proposing a new means of corporate financing.

The highs and the lows: bank failures in Sweden through inflation and deflation, 1914–1926

Abstract This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain ex-ante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.

Loan Default Prediction in Microfinance Group Lending with Machine Learning

Microfinance fintech enables the unbanked and underbanked communities to access credit by offering small, no collateral loans. Microfinance institutions (MFI) usually use credit scoring to filter out risky borrowers. Credit scoring method for individual loans has been widely studied. However, none are for group lending where members are women micro-entrepreneurs in a developing country, and jointly responsible for loan repayment. This research try to build a credit default prediction model for microfinance group lending using machine learning techniques. We examine six different machine learning methods, including XGBoost, logistic regression, linear discriminant analysis (LDA), decision trees, k-nearest neighbour (KNN) and random forest. The XGBoost model performs the best during the first modeling phase. With an accuracy of 0.97 and an AUC score of 0.85, it performs better than other models. Decision tree and random forest give comparable outcomes, with AUCs of 0.81 and 0.80 and accuracies of 0.81, 0.95, and 0.97. In an effort to increase performance, class balancing is performed. The XGBoost model's performance was successfully enhanced, resulting in an increase in AUC from 0.85 to 0.89. Its accuracy stays the same as 0.97. False positive and false negative rates for this model are both low (2.05% and 1.38%, respectively). Consequently, the model has been effectively developed and is capable of differentiating between bad and good loans.

STRATEGI BERTAHAN UMKM PADA MASA PANDEMI COVID-19 PADA PEMBIAYAAN BANK THITIL UNTUK PARA PEDAGANG

One of the sectors most affected by the policies issued by the goverment due to the Covid-19 pandemic is the MSME sector. whereas in fact, MSMEs are the main actors in economic activities in Indonesia. MSMEs are also the largest provider of employement. The decline in people's purchasing power has an effect on the decline in the income of the MSME sector so that the MSME sector is required to have a strategy on how their business can survive or they can still obtain capital to produce further. This study uses field research or field research where researchs conduct research and collect data directly and see the actual phenomenon. The results showed that the traders' survival strategy was to do financing in the informal sector of Bank Thitil because it was considered an easy process and fast time. Compared to other formal or informal sectors. Bank Thitil is the easiest solution because there is no need for collateral as loan collateral. The diffulty experienced by traders is that the interest rates given are too high, so to cover loans in one sector the traders make loans to other sectors so as to multiply the loans they have and bear very high interest rates.