Current Loan Research Articles

How do stock markets in emerging economies respond to World Bank loan approvals?

This paper examines the impact of World Bank loan approvals on equity markets in borrowing countries. We exploit a rich dataset with World Bank loan commitments and daily stock market returns for 47 emerging markets, allowing us to study short run market reactions to news about World Bank programs. These programs fall into three categories: investment projects, structural adjustment loans that tie future macroeconomic reforms to future loan disbursements (prior to FY2006), and development policy loans that reward completed macroeconomic reforms with current loan disbursements (since FY2006). Event study analysis shows positive abnormal stock market returns on the trading day following investment project loan announcements. The effect depends on loan size as well as market characteristics. Structural adjustment loan announcements are followed by negative abnormal returns; development policy loan announcements, in contrast, are considered good news. This suggests that expected macroeconomic implications of policy change in response to loan conditions drive market reactions, and that changes in the conditionality and disbursement structure of World Bank policy lending were successful in improving market reactions to World Bank programs.

Do government fiscal expenditure and financial institutions promote high-tech industry development? Evidence from China

ABSTRACT With economic globalization and the rapid progress of economic transformation, developing high-tech industries has become an important way for many emerging countries to achieve sustainable and environmentally friendly economic development category. This research uses the vector error correction model (VECM) to study the effect of fiscal expenditures and financial support on China’s high-tech industry development during 2001–2022. The results show that government fiscal expenditure has a long-term and stable positive relationship with the output of high-tech industries and the number of new high-tech enterprises, while current loans from financial institutions have a negative relationship with such development. Moreover, fiscal expenditure has a greater and deeper impact on high-tech industries than does the loans of financial institutions. In terms of policy insights, our results imply that the government should continue to improve fiscal expenditure and promote financial innovation to help achieve sustainable and balanced development of high-tech industries.

DETERMINAN LOAN AT RISK: MITIGASI DAN PENGELOLAANNYA

The purpose of this study is to analyze and empirically prove the influence of company internal factors / Bank specific (capital and performance) and company external factors / macroeconomics (economic growth and inflation) on Loan at Risk (LAR), including mitigation and management models in state-owned banks. The research period is 2012 – 2021, the sampling technique is saturated sampling, all members of the population are used as samples. The results of the study show that the Loan at Risk of state-owned banks is influenced by performance, economic growth and inflation. Loan at Risk to be properly mitigated and controlled. The handling must be carried out in an integrated and sustainable manner by the business line (RM) and risk line (CRM), starting from current loans to bad loans, and assisted by technology (digitalization) so that the settlement or recovery can be faster and optimal

Research on the Family Income Gap in China

This paper will start with an investigation of the current consumption situation (consumption structure) and the consumption concept of college students at Chongqing University, and investigate the family income, the monthly living expenses of students (whether there is a work study program) and the current loan situation of college students. Based on this problem, this study plans to use the questionnaire and literature survey methods to investigate the income gap of the families behind the college students through the consumption survey. Through the investigation and sorting of consumption, we can see the family income reflected thereby, and compare the gap between the rich and the poor reflected from different angles. This paper further considers the current consumption situation of college students and what consequences the income gap has brought or will bring, as well as the reasons affecting the income gap. At this stage, particular attention should be paid to the issue of urban-rural income disparity and inequality. In the context of Chinas dual economy, household income inequality mainly comes from inequality between urban and rural areas. Effectively improving the income level of rural residents and narrowing the urban-rural gap are the main targets for achieving common prosperity. To achieve common prosperity, first, improve the income distribution system and the macro income distribution structure. Second, increase the income of low-income groups and accelerate the formation of an olive-shaped structure. Third, improve the social security system to alleviate the challenge of excessive income disparities among groups. Fourth, promote the equalization of basic public services in urban and rural areas, and address income inequality. Fifth, increase public investment in human capital and enhance social mobility.

Analisis Peluang Kredit Lancar Studi Kasus: PT. Pegadaian Area Padang

The purpose of this research to find out how the influence of Customer Characteristics, Business Characteristics, and Credit Characteristics on Current Loans at PT. Pegadaian Area Padang. The factors used are customer characteristics (gender, age, education, marital status, and number of dependents), business characteristics (business field, ownership of business premises, length of business, and income), and credit characteristics (loan value, product, and installment ratio). This research uses logistic regression analysis method. The variables of trading business, loan value, Flexi product, and installment ratio have a significant influence on the chances of a customer's current credit at PT. Pegadaian Area Padang. Meanwhile, the variables of gender, age, education, marital status, number of dependents, ownership of place of business, length of business, and income do not have a significant influence on the chances of a customer's current credit at PT. Pegadaian Area Padang.

A risk-neutral approach to the RAROC method of loan pricing using account-level data

PurposeThis paper has used account-level data of corporate and retail borrowers, assessed their credit risk through the risk-neutral principle and examined its implication on loan pricing.Design/methodology/approachIt derives the capital charge and credit risk-premium for expected and unexpected losses through a risk-neutral approach. It estimates the risk-adjusted return on capital as the pricing principle for loans. Using GMM regression, the article has assessed the determinants of risk-based pricing.FindingsIt has been found that risk-premium is not reflected in the current loan pricing policy as per Basel II norms. However, the GMM estimation on RAROC can price risk premium and probability of default, LGD, risk weight, bank beta and capital adequacy, which are the prime determinants of loan pricing. The average RAROC for retail loans is more than that of corporate loans despite the same level of risk capital requirement for both categories of loans. The robustness tests indicate that the RAROC method of loan pricing and its determinants are consistent against the time and type of borrowers.Research limitations/implicationsThe RAROC method of pricing effectively assesses the inherent risk associated with loans. Though the empirical findings are confined to the sample bank, the model can be used for any bank implementing the Basel principle of risk and capital assessments.Practical implicationsThe article has developed and validated the model for estimating RAROC, as per Basel II guidelines, for loan pricing that any bank can use.Social implicationsIt has developed the risk-based loan pricing model for retail and corporate borrowers. It has significant practical utility for banks to manage their risk, reduce their losses and productively utilise the public deposits for societal developments.Originality/valueThe article empirically validated the risk-neutral pricing principle using a unique 1,520 retail and corporate borrowers dataset.

Effect of Liquidity Risk on the Financial Performance of Quoted Deposit Money Banks in Nigeria

This study examines the effect of liquidity risk on the financial performance of quoted deposit money banks in Nigeria. The ratio of loans and advances to total assets and the ratio of loans and advances to total deposits were used to measure liquidity risk, while Return on Assets (ROA) was used to measure financial performance. Data were collected from the annual financial reports of each of the deposit money banks. The study utilized panel regression to analyse the data from a sample of eleven (11) quoted deposit money banks on the Nigerian Exchange Group from 2014- 2021. The results of the panel regression revealed that the loans and advances to total assets and loans and advances to deposit have a significant effect on the performance of the quoted deposit money banks in Nigeria. The study recommends that quoted deposit money banks management should diversify their loan portfolio to reduce concentration risk. By diversifying the loan portfolio, banks can spread the risk and reduce the impact of defaults on their performance. The current loans to deposit of 65% ordered by the Central Bank of Nigeria should be sustained. However, bank management should manage their deposit growth to ensure that they have sufficient funds to support their loan and advance activities. This can be achieved by setting appropriate deposit rates.

Pengaruh Sistem Pengendalian Internal, Karakteristik Personal, Kondisi Ekonomi, Besar Pinjaman, dan Nilai Jaminan terhadap Pengembalian Kredit pada PT. BPR Nusamba Rambipuji

Repayment of credit is the ability of prospective debtors to repay credit in accordance with the amount, schedule, and time period that has been determined. Not all debtors are able to return credit in accordance with the agreed agreement. At PT. BPR Nusamba Rambi Puji the rate of return on current loans fluctuated from year to year. The purpose of this study was to examine the effect of the internal control system, personal characteristics, economic conditions, loan size, and collateral value on loan repayment (PT. BPR Nusamba Rambi Puji). The independent variables used include: Internal Control System (X1) Personal Characteristics (X2) Economic Conditions (X3) Loan Size (X4) and Collateral Value (X5). The dependent variable is Credit Return (Y). The sample in this study were the credit employees of Pt. Bpr Nusamba Rambipuji selected through purposive sampling method. The analysis used is multiple linear regression analysis, F test, t test, and data quality test through validity and reliability tests. Simultaneously the results of the analysis show that all independent variables have an influence on credit repayments. Meanwhile, it is partially known that the internal control system and the size of the loan are variables that have an influence on credit repayment.

Loan Default Prediction based on Machine Learning (LightGBM Model)

With the rapid development of Internet finance, the number of online loan platforms has been increasing, and the scale of loan business is gradually expanding. At the same time, the bad debt and non-performing loan ratios have also risen sharply, the reasons for which include incomplete information of lenders, imprudent management of capital chain, inaccurate default prediction, etc. Therefore, loan platforms need a set of efficient and accurate loan default prediction solutions to ensure the healthy operation of Internet finance and avoid huge losses for platforms and investors. Current loan default prediction models mainly contain traditional machine learning methods such as logistic regression and decision tree, as well as integrated models such as Random Forest and GBDT. In this paper, we use LightGBM machine learning model to process massive loan default information using the lender information dataset on Tianchi Platform, and the process includes data preprocessing, feature engineering, model training and evaluation. The experimental results show that the LightGBM algorithm has a strong ability to predict loan default, with a final AUC value reaching about 0.73. This method is helpful for banks and Internet loan platforms to conduct background investigation and default prediction of loan applicants, so as to strengthen the ability of loan risk management.

Bank Compliance, Asset Quality, Liquidity to the Financial Sector Profitability Sub Sector Bank Listed on the Indonesia Stock Exchange Period 2018-2020

What motivates researchers to conduct this research is the Lowest Credit to Store Proportion of Banks Since 2016 (M. Richard., 2020) and Policy Strategy Facing the Pandemic: Maintaining Liquidity (Feni Freycinetia, 2020). This journal aims to analyze and test and analyze Bank Compliance, Asset Quality, Liquidity to Profitability either partially or simultaneously. The population in this journal is the financial sector of the banking sub-sector listed on the Indonesia Stock Exchange (IDX) for the 2018-2020 period as many as 43 companies. With the sample in this journal as many as 27 companies that match the criteria of the companies that are sampled in this study. The type of research in this journal is causative quantitative research. sources, the information used in this journal is secondary information. The information that will be used in this journal is in the form of annual reports of sub-sector bank companies listed on the Indonesia Stock Exchange for the 2018-2020 period . The results of hypothesis testing in this journal show the effect of Bank Compliance, Asset Quality, Liquidity on Profitability simultaneously at 0.421 which can be concluded that the Bank Compliance, Asset Quality, Liquidity variables are simultaneously able to explain the Profitability variable of 42.1%. Is stated that the rate of return of the modular, assets, assets, (current loans, bad loans) affect profitability substantially. The rest is influenced by factors other than this journal. And the results of paris research in this journal can be percentaged, namely the influence of Liquidity is the most dominant influence among other variables with a percentage level of 30.2427% while the Asset Quality variable is only able to affect the Profitability variable of 7.31%, and the influence of Bank Compliance is 4 ,5715%

Peer information in loan pricing

This paper studies the effect of peer information banks collected from their previous lending to borrowers' competitors on current loan pricing. I find that firms obtain lower loan rates when borrowing from banks that lent to close competitors recently. To establish a causal interpretation, I utilize peer firms' information-related class action lawsuit events and show that the benefit diminishes when the precision of peer information is reduced. Moreover, the effect is more pronounced for firms with larger dispersion in analyst forecasts and higher uncertainty in hard information. Overall, the findings suggest that banks learn from recent lending to peer firms and utilize peer information, especially when information asymmetry is high.

Strategic issues of raising international financing

The article discusses some strategic issues related to the raising of international financing by the means of syndicated loans and eurobonds by Russian corporations. Author proposes a method for benchmarking the financial position of the company compared to its competitors. This analysis uses key performance indicators, including the debtfinancing share, credit rating, weighted average cost of capital. Crises have become a frequent occurrence in global economy. For the top-managers of the corporation, one of the key tasks during the period of economic uncertainty is the handling of communications with lenders and investors for the control of the company’s financial position. The article considers the specifics of providing the required information about company activity during the crisis. The key document is the financial model, based on the macroeconomic, industrial, and operational assumptions regarding the borrower’s operations. Using financial covenants as an example, we consider the mechanics of incorporating changes into the current loan terms, as well as the raising of new funding by using shirt-term revolving credit facilities. For the solution of one of the key strategic goals of corporate finance – execution of mergers and acquisitions transactions – we present an algorithm of raising financing by using syndicated loans and eurobonds.

The Lewis Growth Rule for Developing Economies

For developing economies, adequate rates of capital formation are required for sustained economic growth, and policy makers have to consider the ratio of savings to invest in capital formation while still being supportive of other economic needs (e.g., servicing of current loans and payment of salaries and administrative overheads). We evaluated the expenditure-savings nexus of four emerging economies (i.e., Ghana, Botswana, Barbados, and Trinidad and Tobago) to investigate, in accordance with the seminal research of Sir Arthur Lewis, how the growth rates of savings and expenditure impact the accumulation of capital and, thus, spur economic development. Based on Lewis' research, we developed the Lewis Growth Rule (LGR) for developing economies – that is, emerging economies can best sustain economic development by maintaining a growth in savings that exceeds that of expenditure and by investing the surplus in the accumulation of capital. As a takeoff strategy for economic development, emerging economies' expenditure should grow by 5%–7%, whereas savings should grow by 7%–12%. We assessed the performance of the LGR by examining the two African and two Caribbean economies using data from the Penn World Tables. Our examination results of long-term trends in these economies demonstrate intermittent periods where the surplus gap as required by the LGR is observed with a downward trend for Barbados and Ghana, while upward for Botswana and Trinidad and Tobago. The impact of Ghana's significant continuous savings gaps on per capita GDP growth is significant over the analysis period. Barbados demonstrated a much lower marginal savings gap, but its positive impact on per capita GDP growth was much higher than that of Ghana. The findings have important implications for policy makers. While a savings gap is important for developing economies, political conflicts depress its impact on the real economy. Hence, the most important is the suggestion that, although critical to capital accumulation, the size of a positive savings gap does not have to be as large as Lewis' rule suggests for economic growth to be sustained. Coordinated government policies, growth supportive institutional arrangements, and investments in technology are also critical in unlocking high productivity that boosts and sustains real economic growth.

Non-Linear Impact of Loan Growth on Profitability of Joint Stock Commercial Banks in Vietnam

This paper investigates the non-linear impact of loan growth on profitability of Vietnamese joint stock commercial banks. The quantitative method is used to analyze the secondary data from the audited financial statements of 24 banks during the period 2009 - 2019. According to the GLS regression results, the loan growth has a positive effect on profitability, and it also has a non-linear effect with the inverted-U sharpe on profitability. In order to ensure the profitability goals, the article recommends that these banks determine the threshold of loan growth to adjust the current loan growth policy and make loan decisions based on the matching between the characteristics of customer groups and the banks’ resource limitation.

Price transparency in OTC equity lending markets: Evidence from a loan fee benchmark

We study the effects of a price transparency shock in the Brazilian equity lending market, an over-the-counter market. Previously, the available loan fee benchmark was the mean loan fee of the past 15 trading days. On March 1, 2011, this interval was reduced to three days, significantly improving short-sellers’ ability to predict current loan fees. We find that after the benchmark change, loan fees fell, lending volume increased, total lending revenue remained stable, high-cost lenders lost market share, and price efficiency increased. Our results suggest implementing price benchmarks in OTC markets can improve market quality.

IFRS 9 Transition Effect on Financial Stability of Kosovo Commercial Banks

From January 1, 2018, most of the commercial banks in Kosovo adopted IFRS 9. The new standard introduces the expected credit loss model to allow for timely recognition of credit losses, estimated not only on the actual credit loss but also on forward-looking information regarding the current loan portfolio. Although, transition phases may lead to increasing impairments and a decrease in banks’ equity, which directly influences the financial stability of banks. This paper examines the day-one transition effect of IFRS 9 on the level of assets balance, allowance for loan losses, and capital regulatory class II of banks in Kosovo. To test our hypothesis, we have performed a comparative analysis for the six biggest commercial banks in Kosovo to identify correlation and causality between studied variables. As a statistical technique, we have employed a “paired sample t-test” where we compare financial indicators before and after adopting IFRS 9 to examine the impact on financial stability for commercial banks in Kosovo.
 Our results are in line with the results of recent studies in the IFRS 9 field and conclude that the transition phase has a significant influence on the recognition of additional loan impairment but assets and capital regulations are not affected significantly. Results demonstrate the transition to IFRS 9 causes instability and re-consolidation of capital, but in the long-run reduce the possibility for large and sudden losses. Commercial banks in Kosovo should follow a balanced growth approach without compromising the quality of the loan portfolio.

Influence of Infrastructure Financing on Financial Sustainability of Water Service Providers in Kenya

Purpose. To establish the influence of infrastructure financing on financial sustainability of water service providers (WSPs) in Kenya.
 Design/Method/Research approach. The study adopted the pragmatism research philosophy and an explanatory sequential mixed design targeting some senior managers selected from the eighty-eight registered WSPs in Kenya. A structured questionnaire was used to collect the quantitative data while an interview schedule was used to collect the qualitative data from key informants. The data analysis was done on the bases of descriptive and inferential statistics; the nature and size of relationship was tested using correlation and the regression analysis while the results are presented using tables and graphs. 
 Findings. The study concludes that Infrastructure financing has a positive and statistically significant influence on financial sustainability of WSPs in Kenya.
 Theoretical implications. The research proves that infrastructure financing has a statistically significant effect on financial sustainability of WSPs in Kenya.
 Practical implications. Taking into account the findings, it is recommended that the National government via the National treasury and WWDAs should ensure that all funding proposals capture end-to-end financing so as to increase the last mile connectivity.
 Social implications. The study also identifies the need for the Ministry of Water, Sanitation and Irrigation (MWSI) to collaborate with key stakeholders in order to tap into local resources and development grants.
 Originality/Value. The study makes a unique contribution by establishing that infrastructure financing significantly influences financial sustainability of water service providers in Kenya.
 Research limitations/Future research. There is need to explore the possibility partnerships with communities and NGOs as the sector is highly indebted and unable to service the current loan portfolio.
 Paper type. Empirical.

Does greater bank competition increase third-party guarantee loan default rates? evidence from U.S. interstate branching deregulation

ABSTRACT Exploiting the interstate branching restrictiveness law that allowed states to erect barriers to branch expansion, we test whether increased interbank competition increases risk-bearing, proxied by higher loan default, for third-party loan guarantors. We find that Small Business Administration (SBA) loans from states with higher restrictiveness (lower competition) are less likely to default, by at least four percent. The findings are robust to a variety of falsification tests. Confirming increased risk transfer to SBA, banks in less restrictive states facing increased competition: increased both SBA loan amount and duration of the loan and the learning-by-loaning (cumulative loan volume before the current loan) did not affect the likelihood of default of the current loan. Counterfactually, loans of higher approval amount and longer duration were less likely to default in more restrictive states.

Economic efficiency of rubber production and affecting factors: Case of smallholder rubber production in Quang Binh Province, Vietnam

Rubber is a perennial crop, so to evaluate economic efficiency of smallholder rubber production, the author uses long-term analysis method with values such as actual present value (NPV), Benefit Cost Ratio (BCR), Internal rate of Return (IRR) and annual value. The factors affecting the productivity of smallholder rubber are assessed through the Cobb-Douglas functional production function analysis method with input factors of communication and non-communication. Data were collected through a survey of 200 smallholder rubber business households in 5 key rubber growing provinces in Quang Binh province. The research results show that Quang Binh province has many favorable conditions for rubber development and the smallholder rubber model has developed strongly, the area has increased rapidly but productivity is low, small in scale, unevenly distributed. In localities, most of them are located in remote areas, investment in resources is limited, production households with low average educational level, not much experience in rubber production and investment capital, limited private. Economic efficiency evaluation shows that with a discount rate of 9%, NPV will reach 80,147 VND / ha; IRR = 18% is larger than the current bank loan interest rate of households and B / C = 1.36> 0, so investment in small rubber business in Quang Binh province is effective. Assessment of factors affecting rubber latex production yield shows that, in addition to the variable density of variables included in the model such as fertilizers, labor, pesticides, rubber garden acreage, age orchards, training, rubber growing areas all have significant impacts on latex yield with 95% confidence. Key words: Economic efficiency, rubber production, smallholder rubber model, Quang Binh rubber, rubber yield.

A Growing Problem: Exploring Livestock Farm Resilience to Droughts in Unit Record Data.

Climate models indicate that New Zealand’s farms will be increasingly exposed to adverse climate events in the future. In this study, we empirically investigate drought impacts on farm enterprises by linking financial, agricultural and productivity data from Statistics New Zealand’s Longitudinal Business Database (LBD) with historical weather data from NIWA. Our sample consists of an unbalanced panel of over 67,000 observations of livestock farm enterprises between 2002 and 2012. We run a set of panel regressions with time and farm fixed effects to estimate the effect of changes in drought intensity on gross output, profit per hectare, current loans and intermediate expenditure of dairy and sheep-beef farms. To explore factors of resilience to droughts, we also examine how the estimates change with different farm characteristics. Most (but not all) of the estimated drought effects are significant, consistent across various specifications and of the expected sign. However, we have limited success in conclusively identifying farm characteristics that affect drought outcomes in our data.