Credit Supply Research Articles

Analyzing the drivers of smallholder farmer’s market participation in the Sahelian region of Niger

Many sub-Saharan farmers rely on agricultural production for home consumption and sell crops to meet their other needs. Farmers’ market intervention enhances economic expansion and helps to improve household food security. In our current study, we strive to explore the determinants of farmers’ decisions and the intensity of market participation in the Sahelian region of Niger, where little has been published, thereby filling the gap in the literature. A double hurdle approach was employed to achieve this objective using a sample collected from 1784 farm households in Niger.Our findings reveal that the total quantity of crops produced, gender, credit access, farming experience, training, drought, and assets positively impact household market participation significantly. Based on these results, as the quantity of crop sales is driven positively and significantly by the amount of crop produced, finding ways to increase crop production will increase household market participation. This can only be achieved by encouraging farmers to adopt high-yield crop varieties, such as climate-resilient ones, to boost productivity. Furthermore, considering the positive association between credit availability and smallholder market participation, any initiative in the agricultural sector that will bring efforts to supply credit and farm inputs to farmers will surely help to improve agricultural production and household market participation.

The Effect of Capital and Lending on Increasing the Income of UMKM Small Traders Customers of the Koperasi Serba Usaha Mestika

Provision of Capital and Credit is one of the instruments for business development, namely with sufficient capital or large small traders, UMKM can develop their business so that they can increase people's income and can make the country's economy improve and economic activities can run which has an impact on the country's prosperity. This study aims to determine and analyze the effect of increasing the income of micro, small and medium enterprises traders and to determine the effect of capital and lending on increasing the income of small, micro, and small business traders, customers of the Koperasi Serba Usaha Mestika. The methodology used is a quantitative approach with data obtained directly from the questionnaire questions which were analyzed using the multiple linear regression analysis method and processed using the eviews application. The results of the research are expected to be able to know about capital and lending to Koperasi Usaha Mestika in depth, especially in financing funds through the distribution of working capital loans to small and medium enterprises.

When Losses Turn into Loans: The Cost of Weak Banks

We provide evidence that banks distort the composition of credit supply in order to comply with ratio-based capital requirements in times of economic distress. An unexpected intervention by the European Banking Authority provides a natural experiment to study how banks respond to falling below minimum required capital ratios during an economic downturn. We show that affected banks respond by cutting lending but also by reallocating credit to distressed firms with underreported loan losses. We develop a method to detect underreported losses using loan-level data. The credit reallocation leads to a reallocation of inputs across firms. We calculate that the resulting increase in input misallocation accounts for about 22 percent of the decline in productivity in Portugal in 2012. (JEL E23, E32, G21, G28, G32, G38)

Credit market development and corporate earnings management: Evidence from banking and branching deregulations

We investigate how external credit market development affects corporate earnings management, by studying the impact of the U.S. interstate banking and branching deregulations on the intensity of accruals-based and real earnings management. We find that the banking and branching deregulations significantly decrease both accruals-based and real earnings-management intensity among firms in deregulated states. The effect is stronger for those deregulated states that have lower bank branch density before deregulation and states that have greater out-of-state bank entry after deregulation. The impact on corporate earnings management is channelled through increased banking competition and credit supply providing firms with easier access to external financing. The findings are robust to various endogeneity concerns. We further document that interstate banking and branching deregulations reduce the instances of financial results being subsequently affected by accounting restatements and improve firms’ information environment.

ECONOMIC PERFORMANCE of WOMEN HONEY MARKETERS in ENUGU STATE, NIGERIA

Honey marketing is an important off-farm economic activity for women's livelihood and sustenance. Despite this, there is scant information in the literature about the economic performance of women honey marketers. Therefore, this study investigates the economic performance of women marketers, its drivers, and its challenges. Data collected from 120 women honey marketers were analyzed using descriptive statistics, gross profit, net profit, benefit-cost ratio, return on capital invested, operating ratio, marketing margin, and multiple regression. We found that honey marketing was a profitable venture, as indicated by the high gross profit (USD 262.08), net income (USD 257.03), marketing margin (56%), benefit-cost ratio (1.72), and return on capital invested (0.72) per 58.14 liters sold. Honey marketing also had a low operating ratio of 0.57. Thus, women honey marketers performed economically well. The significant factors that enhanced the profitability of honey marketing were education, experience in honey marketing, credit, and membership in an association. While age, purchasing costs, and transportation costs reduced honey marketing profitability. Inadequate capital and credit, price fluctuations, a poor road network, high transportation costs, adulteration, and poor marketing information were the major severe constraints faced in honey marketing. These call for the provision of credit, training, and education to honey marketers by the government to enhance the profitability of the enterprise.

The nexus between economic policy uncertainty and access to finance: a study of developing countries

PurposeThis paper attempts to document the effect of economic uncertainty on financing constraints faced by private firms.Design/methodology/approachOrdered logistic regression is used to analyze the data of private firms from 101 developing countries. The data was provided by the World Bank's Enterprise Surveys and was gathered during the period between 2006 and 2019.FindingsThe findings show that firms headquartered in countries with high economic uncertainty face more financing constraints than firms headquartered in countries with low economic uncertainty. The authors argue that the increase in economic uncertainty allows capital providers to adjust their lending decisions by reducing the provision of capital to firms. The paper also shows that firms headquartered in countries with strong institutional infrastructure and well-functioning firms are less likely to be affected by economic uncertainty while accessing finance.Practical implicationsThe findings would help managers, investors, regulators, and policymakers better understand the implication of economic policy uncertainty on the real economy. This study also sheds the light on the importance of minimizing volatility, ambiguity, and randomness in governmental decisions and policies. Regardless of the pertinence of these policies, arbitrariness surrounding their development and communication can limit their effectiveness and produce unwanted effects.Originality/valueThis paper is closely related to prior literature that documents the behavior of credit providers and investors (the supply side) during the periods of economic uncertainty. The authors differ from this strand of literature by taking the perspective of firms – the demand side.

OPTIMAL PAYMENT CONTRACTS IN TRADE RELATIONSHIPS

AbstractIn buyer–seller relationships, offering trade credit to buyers fosters long‐term collaboration but seller provision varies systematically as relationships evolve. We study the optimal provision dynamics of trade credit when the seller's information about the buyer is incomplete. We show how the interaction of self‐enforcing relational contracts and formal contracts determines optimal payment contract choice. We find that payment contracts can be interpreted as screening technologies and imply distinct learning opportunities about the buyer's type. In line with empirical evidence, the model predicts that all transitions between payment terms lead to seller trade credit provision in the long run.

Determinants of Green Credit and Their Influence on Banking Profitability in Indonesia

Green finance involves efforts to internalize environmental externalities and adjust risk perceptions to encourage environmentally friendly investments and reduce those that are harmful to the environment. One form of green financial support is the provision of green credit by banks. This research aims to test the effect of green credit on bank profitability, and test the effect of capital adequacy, operational efficiency, credit risk and bank size on bank profitability. This research also examines the influence of capital adequacy, operational efficiency, credit risk and bank size on green credit. The population in this study are banks operating in Indonesia with a sample of all banks that have a commitment to green credit. To test the hypothesis, use panel data regression analysis. After conducting a model test, the best model was obtained, namely the fixed effect model. The results of research using the fixed effect model show that green credit in Indonesia is not influenced by bank capital adequacy, bank operational efficiency, bank liquidity, bank credit risk, and bank size. However, green credit has a significant positive effect on bank profitability in Indonesia. Another result is capital adequacy, which has a positive effect on profitability, while operational efficiency and bank size have a significant and negative effect on profitability, while credit risk has no effect on profitability.

Commodity terms of trade volatility and industry growth

The rising volatility of commodity terms of trade (CTOT) is associated with a high cost of capital and a low credit supply for producers in commodity-dependent countries. In this paper, we examine how volatile CTOT influences various industries’ growth performance based on sector-level panel data for countries specializing in commodity exports. We find robust evidence that CTOT volatility causes a more significant growth loss in manufacturing sectors facing tighter credit constraints. The adverse growth effects operate through lower total factor productivity in industries heavily reliant on external finance for long-term investments and through lower capital accumulation in industries with high liquidity needs for short-term working capital. Our findings offer a complementary explanation for the “resource curse” through the credit constraint channel.

Determinants of FinTech and BigTech lending: the role of financial inclusion and financial development

<p><big>Credit markets around the world are undergoing digital transformation which has led to the rise in FinTech and BigTech lending. FinTech and BigTech lending is the provision of credit by FinTech and BigTech providers who have more capital, cutting-edge IT systems, worldwide recognition, greater online presence and are able to handle more big data on computers and mobile phones than traditional banks. FinTech and BigTech lending is growing in importance, but the determinants of FinTech and BigTech lending have received little attention in the literature. This study investigates the determinants of FinTech and BigTech lending. The study focused on the effect of financial inclusion and financial development on FinTech and BigTech lending. Using data for 18 countries from 2013 to 2019 and employing the difference-GMM and 2SLS regression methods, the findings reveal that financial inclusion and financial development are significant determinants of FinTech and BigTech lending. Financial development is a positive determinant of FinTech and BigTech lending while financial inclusion has a significant effect on FinTech and BigTech lending. Also, FinTech and BigTech lending lead to greater banking sector stability and also poses the risk of rising nonperforming loans. There is also a significant positive correlation between financial development and FinTech and BigTech lending. These findings add to the emerging literature on the role of FinTech and BigTech in financial intermediation. This research is significant because it provides insights into the role of financial inclusion and financial development in the digital transformation of credit markets.</big></p>

Active imitation or passive reaction: research on the peer effect on trade credit

PurposeUsing a sample of manufacturing firms listed in China between 2007 and 2019, first, this paper aims to examine whether peer firms influence corporate trade credit supply. Next, the authors examine the channels through which peer firms influence corporate trade credit supply by testing the predictions of rivalry and information theories. Furthermore, the authors examine the heterogeneity of the industry peer effect on corporate trade credit supply. Finally, the authors examine the economic consequences of the industry peer effect on corporate trade credit supply.Design/methodology/approachThe sample includes all manufacturing firms listed on both the Shanghai and Shenzhen securities exchanges for the sample period from 2007 to 2019, and the data come from the China Stock Market & Accounting Research database. The authors use the fixed effects method to examine the industry peer effect on trade credit supply. The results are robust to a series of robustness tests. To address the potential endogeneity problem, the authors adopt appropriate instruments by estimating instrumental variable models (two-stage least square). The authors use Heckman’s two-stage model to mitigate the sample selection bias.FindingsThe authors provide strong empirical evidence showing that the industry peer effect on trade credit supply exists in the manufacturing sector. It is also found that both competitive rivalry-based and information-based theories can provide explanations of the industry peer effect on trade credit supply. This process is both active imitation and passive reaction. Additional analysis suggests that the industry peer effect on trade credit supply is more pronounced for state-owned firms, firms with low customer concentration and firms with high geographical proximity. The amplification effect and spillover effect are the economic consequences of the industry peer effect on trade credit supply. In other words, the trade credit supply based on peer effect will not only increase the liquidity risk of the firm per se but also induce and increase the liquidity risk of the industry.Originality/valueThe study makes some important contributions. First, the authors find robust evidence that peer firms’ trade credit supply is an important factor in explaining corporate trade credit supply, which extends the literature by connecting the firm’s trade credit supply with the peer effect. Second, the study provides a new micro-perspective for understanding that firms use trade credit supply as a tool of competition, which proves the importance of rivals’ decision-making as a determinant of corporate decisions. Third, the authors examine the industry peer effect on trade credit supply, which not only helps to guide firms to pay more attention to the potential risk and spillover effects of the trade credit supply decision-making relevance but also helps to clarify the industry interaction phenomenon of corporate decision-making behavior. It is an important practical significance to play a role as a bridge between the microlevel of the firm and the meso-level of the industry. Finally, the study provides inspiration for the formulation of industry norms and policies.

A study of the impact of digital inclusive finance on firm value from the perspective of financing constraints

ABSTRACT The existing research on the impact of digital inclusive finance on corporate behaviour is relatively extensive, but the research on the impact of digital inclusive finance on corporate value is ignored. To fill in this gap, this study examines the impact of digital inclusive finance on firm value from the perspective of financing constraints, utilizing data on A-share listed companies in China from 2012 to 2019. We found that digital inclusive finance helps increase corporate value. And digital inclusive finance uses digital technology to alleviate financing constraints and improve the credit supply, which in turn increases firm value. Moreover, the impact of digital inclusive finance on firm value demonstrates heterogeneity. Compared with other firms, digital inclusive finance has a greater value-enhancing effect on small-scale and private firms. Our findings suggest that increasing the level of digital inclusive finance in developing countries can help enhance firm value.

ANALISIS TINGKAT KESEJAHTERAAN MASYARAKAT DAMPAK PEMBERIAN KREDIT (Studi Pada Debitur PD. BPR NTB Sumbawa)

This study aims to examine the impact of the provision of credit by PD. BPR NTB Sumbawa on the welfare of debtor customers through per capita income indicators. This research is a comparative study to compare the income levels of customers before and after receiving working capital loans from PD. BPR NTB Sumbawa. The type of data used is quantitative data in the form of customer income before and after receiving working capital loans from PD. BPR NTB Sumbawa obtained directly from customers. The research subjects were customers who received working capital loans from PD. BPR NTB Sumbawa in 2022, totaling 37 people. Data collection was carried out through structured interviews using a list of questions that had been prepared by the researcher to obtain relevant data related to the research object. Data analysis techniques were carried out using the two-average difference test method, including calculating the difference in income, standard deviation, and one variable test. Based on the results of the research that has been done, it can be concluded that there are differences in the average income of respondents before and after receiving working capital loans from PD. BPR NTB Sumbawa. There was an increase in the income of customers who were used as respondents after receiving working capital loans from PD. BPR NTB Sumbawa of Rp. 81,432,081.04/month.

Legal Protection of Banks for the Cancellation of Land Certificates Due to Overlapping which are Being Breaked with Guarantee Rights

The provision of credit by banks should receive legal protection for both creditors and debtors. One of the conditions for granting credit is the existence of a guarantee that functions to provide a sense of security for creditors against returning credit funds in the event of default or default. The problem in this study is the cancellation of property rights certificates burdened with mortgage rights due to overlapping. The protection given to banks in the event of cancellation of collateral objects in this writing is carried out by collecting library materials and also interviews with empirical normative methods. Empirical normative legal research is research conducted by examining literature and laws and regulations related to problems and information obtained based on interview results. The results of this research are expected to be useful and useful for the development of legal science, especially Civil Law, as well as the fields of Banking Law, Guarantee Law, and Agrarian Law. This research is expected to be used as a source of knowledge, especially how to protect banks in the event of cancellation of collateral objects and the settlement mechanism and preventive efforts made by the Land Agency of the City of South Tangerang to prevent overlapping certificate problems

Effective risk management in the shadow of COVID-19 pandemic: The evidence of Indonesian listed corporations

The study uses COVID-19 to identify the treatment group as the difference in change of non-financial corporations (NFCs) risk management ratios over time to investigate the causal effect of the NFCs' effective risk management (ERM) practices on operational efficiency (OE). ERM was measured by solvency and liquidity ratios, while the risk management theory was developed to refine the scope of the study. The data were collected from the central bank of Indonesia to map the empirical analysis, and the difference in difference (DID) technique was used to illustrate how NFCs react to mitigate the negative impact of COVID-19 and generate OE. Specifically, a quasi-natural experiment was used to size the effect of ERM practices on corporate OE during the COVID-19 pandemic. The descriptive analysis revealed that the COVID-19 pandemic effect has been unequal across different industrial sectors. Moreover, the empirical findings showed that corporate risk management during COVID-19 is the source of structural change, which affects its existence and operational efficiency. While debt amount and age may affect corporate credit score, ERM practices led the indebted corporation to the flexibility of debt refinancing or/and restructuring, which offers them the ability to prevent bankruptcy and adapt to the changes while operating efficiently. The finding revealed evidence of the important role of long-term debt in offering protection to NFCs during the credit supply shock brought in by the COVID-19 pandemic. Furthermore, the findings show that long-term debt is negatively associated with corporate OE. This was expected given that corporations use long-term debt financing for long-term investment, while short-term debt funds the working capital. Thus, to assess the effect of debts on corporate OE, managers should consider their maturity structure, among other factors.

When the Lender Extends a Helping Hand: Native CDFI Client Counseling and Loan Performance in Indian Country.

Native Community Development Financial Institutions (NCDFIs) fill credit supply gaps and promote financial inclusion in Native communities. To mitigate lending risks and aid clients, NCDFIs often rely on unconventional lending practices such as providing clients with free financial counseling. Drawing on uniquely detailed consumer loan-level data of one prominent NCDFI, we empirically model the hazard of a loan turning into bad debt. Our analysis shows that borrower exposure to NCDFI-provided financial counseling appreciably reduces the prospects of consumer loan failure when the borrower has had limited prior credit-market experience. Personalized coaching is more effective than the relatively less client-tailored, classroom-style training. Our results have implications for the lending practices of creditors serving Native communities and beyond. More broadly, our findings are indicative of the importance of the growing, but understudied, NCDFI industry for financial development of Indian Country.

Pengaruh Pemberian Kredit Usaha Rakyat Terhadap Pendapatan Usaha Mikro Kecil Dan Menengah

This study aims to determine how much influence the provision of people's business credit (KUR) has on the income of micro, small and medium enterprises (UMKM). This research uses quantitative methods. The data used is primary data obtained from distributing questionnaires. The population of this research is UMKM BRI Unit Aloei Saboe customers, Gorontalo City. The sampling technique used purposive sampling. The data analysis method used is Structural Equation Modeling (SEM). The results of this study indicate that the provision of people's business credit (KUR) has a significant effect on the income of micro, small and medium enterprises (UMKM) on BRI Unit Aloei Saboe UMKM customers, Gorontalo City.

Transfer Of Billing Rights To Third Parties In The Banking System

In the banking world, the implementation of Cessie is generally due to Old creditors requiring financing so that the operational implementation of their business continues to run. In the provision of bank credit should be made in a written form, and the bank must have confidence in the ability and ability of the debtor customer obtained from the results of both internal and external assessments , capabilities, both capital,as well as collateral and business prospects of the debtor customer. The implementation of cessie according to Article 613 of the Civil Code is carried out on receivables on behalf of the old creditor, to the new creditor on the debt of the debtor by making a cessie deed, either an authentic deed or a deed under the hand with the obligation to be notified to the debtor or in writing approved and recognized by the debtor. With legal consequences receivables switch from the old creditor to the new creditor.

How does green credit policy affect polluting firms' dividend policy? The China experience

We explore how polluting firms alter their dividend policy in response to pressure from green credit policy. The green credit guidelines that China adopted in 2012 aim to promote credit supply in sustainable development. Meanwhile, this green credit policy forced polluting firms to access restricted credit supply and tightened bank monitoring. Using the adoption of the green credit policy as a quasi-natural experiment, we find that polluting firms tend to lower their dividend payments, consistent with the view that dividends act as an effective tool of liquidity management and a substitute to mitigate agency problems. This finding is more pronounced among firms with weaker corporate governance, greater financial constraints, and more green innovation output. Our further analysis suggests that the green credit policy forces polluting firms to engage in less dividend smoothing.

Did small banks trade off lending with government bond purchases during the Sovereign debt crisis?

At the beginning of the decade, many banks in euro-area periphery countries shifted their portfolios from corporate lending towards sovereign debt holdings. According to some scholars, this was the result of the moral suasion exerted by domestic authorities; others suggest instead that it was the outcome of a free choice of weak banks that bet-for-resurrection increasing the holdings of risky, high yielding government bonds. Our analysis shows that the contemporaneous increase in banks’ total assets and the portfolio readjustment from loans to government bonds can be explained by a surge in the risk-premium required by banks on corporate lending. After briefly describing our hypothesis within a simple model of a bank’s portfolio choice, we test its empirical implications on a large sample of individual loan data granted by over 100 Italian small banks during the post sovereign debt crisis period (2012–2014). Our results provide convincing evidence in support of the hypothesis that the banks which increased the most their government bond holdings were also those which reduced more significantly their credit supply.