Emergency Loans Research Articles

Making Sense of Anything thru Analytics: Employees Provident Fund (EPF)

Employees Provident Fund (EPF) has always been a hot topic, from the previous Government permitted “withdrawals” during the pandemic to the present Government disallowing further withdrawals (afraid it would lead to a financial crisis) and allowing emergency loans through an EPF collateral agreement. The latter used median studies to “contribute” MYR 500 to EPF members with less than RM 10,000 in their accounts. Baffled/bewildered by the current Government’s generosity and highlighted in this paper, I used Monte Carlo simulation, a method used by analysts when determining the size of a client’s portfolio to support their desired retirement lifestyle, to establish a reference-type table displaying ideal savings when reaching 50. The Government could use the table mentioned above to give more meaningful contributions to EPF members, apart from EPF active and inactive members, knowing where they stand concerning their current EPF savings.

Rethinking Germany's Debt Brake: The Amortisation of Emergency Loans

Rethinking Germany's Debt Brake: The Amortisation of Emergency Loans

The impact of the cost-of-living crisis on British credit unions and community lenders

Credit unions are often hypothesised to be less vulnerable to crises than other types of businesses. This paper examines the impact of the cost-of-living crisis on the British credit union and community lender sector drawing on interviews with 25 managers and a focus group with four loan officers. This crisis is affecting businesses and households through high inflation, declining real pay, rising interest rates, and falling economic growth. The findings suggest that credit union and community lender customers are experiencing a deterioration in their finances. They save less, have more unsecured debts, are less likely to qualify for a loan, and are more likely to default on loan payments. Lenders are grappling with a tension between supporting customers affected by the crisis and preserving their own financial position. On the one hand, there is evidence of lenders providing additional support to their members, including emergency loans and hardship payments. On the other, they are mitigating the risks of deteriorating customer finances by tightening lending criteria and reducing lending to higher risk groups. The findings underline the need for future research into the long-term effects on the sector and its ability to provide finance to underserved communities.

Filling the Niche—A Synthesis of Financial Inclusion among Smallholder Farmers in Africa, the Case for Kenya

This paper makes a synthesis of empirical studies carried out in parts of Africa, and in Kenya to derive lessons on financial inclusion among smallholder farmers in rural and peri-urban areas. The derived lessons point at a steadily growing expansion of financial services to rural/peri-urban poor traditionally characterised by high idiosyncratic risks and huge information asymmetry. This category of households seems to have made the African continent sustain itself in the midst of financial crisis in 2008/09 when the rest of the world including the Asian tigers and the American capitalists faced serious setbacks in their financial sector growth. During this period, Africa experienced steady growth that started in 2000 at below 3% and peaked at about 4.8% by 2009-2015. The contribution of the transformation of the financial sector experienced in Kenya is one of the reasons for this growth. The paper elucidates the key determinants of access to the reformed financial services by the rural poor, access to targeted training on financial services beyond the formal education, participation of female-headed households in collective frameworks and creditworthiness as exhibited by multiple borrowing points. The impact of such inclusion is exhibited by significant changes in purchasing power of households through income and diversified investment in farm assets. In all these successes, ICT through mobile money transfer played a significant role, as exhibited in studies across the region. Despite the successes, the key challenges include high fungibility of targeted funding, showing a need to provide an array of financial services to the poor including credit for consumption, school fees, medical cover and emergency loans found among the savings and credit cooperatives. Also, the inequality and raising the poorest of the poor is still a challenge, one reason being the instrumental role of ICT through mobile money transfer system which some of the poorest farmers have no access to. Mobile banking services such as M-Shwari product is something that extension personnel could take as part of their advice to small farmers in accessing short-term loans and as means of savings funds between USD 1 - 100. These kinds of funds are useful in particular in bridging financial gaps along the agribusiness value chains. The funds can be borrowed to transport produce to the market, and make payments in time to enable farmers to capitalise on their input purchases. On participation of smallholder farmers in mobile banking type, and in particular saving and immediate credit service is still limited. This is an area for immediate uptake by all stakeholders including policymakers and the financial sector.

Switzerland – 2020 Review of Constitutional Law: Constitutional and Administrative Law amid the COVID-19 Pandemic

When the coronavirus disease 2019 (COVID-19) reached Switzerland in February 2020, the Federal Act of 28 September 2012 on Combating Communicable Human Diseases (Epidemics Act, EpA)’ had been in place for more than four years. The EpA was subject to a referendum in 2013. 60% of the voters approved the bill. The EpA set a three-tier approach in place: An aggravation of the epidemiological circumstances leads, based on a respective decision by the executive branch of the federal government (Federal Council), to a transfer of governmental tasks and responsibilities from the cantons (constituent states) to the Federation (federal government) on the one hand and from Federal Parliament (legislative branch) to the Federal Council (executive branch) on the other hand. The more the epidemiological situation escalates, the more power is thus being concentrated in the Federal Council. In the ‘first wave’ of the pandemic, emergency loans to small and mid-size businesses were swiftly administered by Swiss banks, underwritten with a full credit guarantee on the amount by the federal government, based on a unique and effective public-private partnership. Despite severe restrictions of fundamental rights, courts have played a mere subordinate role during the pandemic. The ‘second wave’ of the pandemic, peaking in November 2020, led some of the shortcomings of Switzerland’s political system bare. Its alignment towards consensus and integration of linguistic, confessional, and socio-economic minorities within the country, as underpinned by the Federal Constitution and as a salient advantage of the Swiss political system, comes at the price of the diffusion of political accountability. Direct democracy, federalism, the separation of powers between Federal Parliament and the Federal Council as well as the collegial decision making and interaction within the executive branches at both federal levels (Federation, cantons) all provide politicians not only with loopholes to evade political accountability, but also rhetorical munition to shift blame onto other actors within the political realm.

Regional Banking Market Structure and Emergency Loans to Small Businesses: Examining the Paycheck Protection Program during the COVID-19 Pandemic

I examine the effects of banking market structure on small business emergency lending to respond to an economic crisis. In particular, I focus on the role of banking market concentration and the presence of community banks in contributing to the number of loans made to small businesses through the Paycheck Protection Program (PPP) during the COVID-19-induced economic shock. Existing theories expect that small business credit access is reduced by higher banking market concentration and increased by community banks. I also explore how these two market characteristics interplay in regional small business credit markets. Using the U.S. county-level data, I find that greater banking market concentration reduces the number of PPP loans per business, but the negative effect is diminished by a greater presence of community banks. Furthermore, the greater presence of community banks increases the number of PPP loans but only in a highly concentrated credit market.

Social Security, Dead Capital and Economic Inequality

Economic inequality in America continues to grow, taking on ever greater economic and political importance. The reasons for increasing inequality are complex and widely debated, as are potential policies to address it. This paper focuses on a vital but unrecognized part of the story: how the social security retirement program has become a major systemic barrier to the acquisition of wealth by low- and moderate-income families, worsening inequality in general and the racial wealth gap in particular. Most families have no meaningful financial assets other than their social security wealth. Unlike other retirement savings, however, social security wealth is “dead capital,” completely inaccessible to families in need of resources to invest (in homeownership, most importantly) and to cope with unexpected financial shocks. After setting out the nature and magnitude of the problem, this article proposes a straightforward, practical remedy – the creation of Social Security Downpayment and Financial Emergency Loans – that would reduce inequality by helping families build financial security for themselves and wealth for future generations. These loans would counter the adverse effects of social security’s forced-but-inaccessible savings, opening the way to a much broader distribution of wealth.

Financial Literacy and Financial Inclusion as Tools to Enhance Small Scale Businesses’ Performance in Southwest, Nigeria

Purpose: The study sought to examine the impact of financial literacy and financial inclusion on small businesses’ overall performance with special reference to Southwest Nigeria. 
 Methods: Descriptive survey research sketch was adopted for this study, while the purposive sampling method was employed to choose forty small scale businesses registered with SMEDAN from each state capital of South Western of Nigeria that engaged in petty trading, bakeries, block-making, soup-making, tailoring, and agro-allied, totaling 240 participants as a sample size for the study. Data were collected by using a closed-ended questionnaire designed for the study, while simple percentage, mean, standard deviation, Pearson Product Moment Correlation (PPMC), and Ordinary Least Square (OLS) was used to analyze the data. 
 Results: The findings disclose that financial literacy and financial inclusion jointly and independently affect small businesses’ performance. It revealed a positive and significant relationship between financial literacy and financial inclusion. However, the study depicts that majority of business operators did not have financial knowledge such as working capital management, accounting records system, financial reporting, cashbook maintenance, income statement, daily cash reconciliation, internal control on cash, and cash budget. Also, the study confirmed that the majority of small business entrepreneurs are financially excluded from micro-financing, emergency loans, employ purchase financing, business bank loans, and micro-insurance plan Services. 
 Implications: The implication of this study is that if the Central Bank of Nigeria partnership with other professional organizations to promote financial literacy and inclusion programs to all business entrepreneurs across the nation, it will motivate more business entrepreneurs in Nigeria to have access to finance.

Incentivising employment during the COVID-19 pandemic

ABSTRACT This article considers government responses to unemployment caused by the COVID-19 pandemic. It analyses the two main legislative responses adopted by North American governments: a broadening of access to (un)employment insurance (EI) and the adoption of payroll subsidies for companies. It comparatively and critically assesses these two solutions, to eventually propose an alternative plan. Under this plan, access to EI would be broadened to cover those not traditionally covered by it, such as self-employed workers, contract workers, and those caring for a family member sick from COVID-19 or for a child who is at home due to school and day-care closures. Unemployed workers who have traditionally paid into the EI system would be rewarded through a tax credit. To avoid incentivising temporary layoffs, a payroll subsidy would be adopted. The subsidy would make it as attractive to keep workers on payroll as to lay them off so they can benefit from EI. It would also provide a more faithful picture of unemployment rates during the crisis. The plan would also address broader concerns regarding the unsustainability of public spending during the crisis by limiting access to both temporary layoffs and the payroll subsidy. Large and profitable companies, as well as companies with high revenue or cash reserves, would not be able to temporarily lay their employees off during the crisis or benefit from the subsidy. For companies that face liquidity issues yet are not eligible for the subsidy, short-term, interest-bearing emergency loans would be available.

The COVID-19 Crisis: Policy Recommendations for Japan

Abstract Japan economy is dominated by Small and Medium enterprises. It covers around 99.7% of all enterprises operated in Japan and employs around 70% of the working population and account for a large portion of economic output. But, like other SMEs in the world, they also the ones that have hardly hit by COVID-19 quarantine and business closures. Japanese government made emergency loans and credit guarantee to assist SMEs. However, moral hazard problems of banks and SMEs have to be remedied. In the capital market, many investors take risk-averse behavior to anticipate further measures. Infrastructure investments are most needed in Asian region yet finance for infrastructure investments would face with shortage of funds due to low rate of return and risks. Private financing by long term investors such as pension funds and insurance better be directed to support infrastructure investment. Spillover tax revenues could be partly directed to increase the rate of return. The Japanese economy faces with aging population which would widen fiscal deficits unless postponement of retirement age and productivity-based wage rate rather than seniority wage rate facing with this crisis. Therefore, Japan government need to look into innovative policies options for sustainable economic growth.

Small Business Administration emergency loans available for nonprofits

In its effort to minimize economic disruption wrought by COVID‐19, the U.S. Small Business Administration is working directly with state governors to provide targeted, low‐interest disaster recovery loans to small businesses and private nonprofit organizations that have been severely impacted by the pandemic.

Emergency loans and collateral upgrades: How broker-dealers used Federal Reserve credit during the 2008 financial crisis

During the 2008 financial crisis, the Federal Reserve established two emergency facilities for broker-dealers: one provided collateralized loans; the other, collateral upgrades. These facilities alleviated dealers’ funding pressures when access to repos backed by illiquid collateral deteriorated. The ability to upgrade collateral allowed dealers to continue funding their own illiquid inventories (avoiding potential firesales) and to provide better bond market liquidity. It also helped sustain dealers’ credit to hedge fund clients, which in turn posted relatively better returns.

Emergency Loans and Consumption – Evidence from COVID-19 in Iran

We use monthly and daily transaction data from Iran, disaggregated by provinces, good and service categories, and retail store segments to gauge the impact of government emergency loans on consumption patterns. We find that emergency loans are positively related with higher consumption of non-durable and semi-durable goods, suggesting that the emergency loans were predominantly used for their intended purpose. The effects were strongest in the first few days and then dissipated over time. We find effects only for in-store but not online transactions and in poorer rather than richer provinces, suggesting that it is the poorer who reacted more strongly with higher consumption to the emergency loans.

Incentivising Employment during the COVID-19 Pandemic

This article considers government responses to unemployment caused by the COVID-19 pandemic. It analyses the two main legislative responses adopted by North American governments: a broadening of access to (un)employment insurance (EI) and the adoption of payroll subsidies for companies. It comparatively and critically assesses these two solutions, to eventually propose an alternative plan. Under this plan, access to EI would be broadened to cover those not traditionally covered by it, such as self-employed workers, contract workers, and those caring for a family member sick from COVID-19 or for a child who is at home due to school and day-care closures. Unemployed workers who have traditionally paid into the EI system would be rewarded through a tax credit. To avoid incentivising temporary layoffs, a payroll subsidy would be adopted. The subsidy would make it as attractive to keep workers on payroll as to lay them off so they can benefit from EI. It would also provide a more faithful picture of unemployment rates during the crisis. The plan would also address broader concerns regarding the unsustainability of public spending during the crisis by limiting access to both temporary layoffs and the payroll subsidy. Large and profitable companies, as well as companies with high revenue or cash reserves, would not be able to temporarily lay their employees off during the crisis or benefit from the subsidy. For companies that face liquidity issues yet are not eligible for the subsidy, short-term, interest-bearing emergency loans would be available.

How the Slave Trade Fostered Last Resort Lending

It is a little known fact that the first beneficiaries of extraordinary term lending facilities from the Bank of England were the slave traders. By tracing the history of the Bank’s extraordinary term loans, this paper demonstrates that the first regulation governing extraordinary term lending was modelled on loans made to slave traders a few years earlier. The Bank’s first repo loans and the Bank’s first effort to lend against goods were made for slave traders. The paper also notes that by 1816 the Bank was providing emergency loans to support employment in local economies at risk of depression. These facts should shift the burden of proof in the debate over the role of slavery in the Industrial Revolution: those who doubt that income drawn from the slave trade fostered the financial development that made the Industrial Revolution possible should bear the burden of showing that in fact it did not.

CEO Compensation at Financial Firms

We examine whether risk-taking among the largest financial firms in the U.S. is related to CEO equity incentives before the 2008 financial crisis. Using data on U.S. Federal Reserve emergency loans provided to these firms, we find that the amount of emergency loans and total days the loans are outstanding are increasing in pre-crisis CEO risk-taking incentives – “vega”. Our results are robust to accounting for endogeneity in CEO equity incentives and selection of financial firms into emergency loan programs. We also rule out the possibility that our results are driven by a financial firm’s funding base, its complexity, or CEO overconfidence. We conclude that equity incentives (vega) embedded in CEO compensation contracts were positively associated with risk-taking in financial firms which resulted in potential solvency problems. We also find some evidence, although somewhat weaker, that higher incentive alignment (“delta”) mitigated such problems in those financial firms.

Analysis of Personal Loans and Household Financial Health of Primary School Teachers in Kenya

Liberalization in the finance industry in Kenya has led to increased access to credit facilities to Kenyan employees. Primary school teachers are among the beneficiaries. The objectives of this study were to: evaluate the effects of school fees loans on household financial health of primary school teachers in Emining division, assess the effects of home improvement loans on household financial health of primary school teachers in Emining division, examine the effects of emergency loans on household financial health of primary school teachers in Emining division and establish the effects of development loans on household financial health of primary school teachers in Emining division. The study used descriptive research design. Purposive sampling was used to collect data from 165 respondents, 5 teachers from each of the thirty three primary schools, in Emining Division, Baringo. Biographic data on the respondents was analyzed using descriptive statistics such as percentages. Primary data for this study was collected using structured questionnaire. The questionnaire was self-administered. Regression was conducted to test the effect of the various independent variables pooled together on the dependent variable. Two tail t-test and ANOVA test was used to determine the degree of significance of the relationship. The data analyzed was presented in form of tables. Relationships between unsecured personal loans and household financial health of primary school teachers in Emining division was determined at alpha level of p<0.05. Results of the study showed that there is statistical significant relationship between unsecured personal loans and household financial health. Findings of the study also revealed that there is a strong positive relationship between unsecured personal loans and household financial health with a significance value of p= 0.000. Therefore the study concluded that there is strong positive statistical significant relationship between unsecured personal loans and household financial health of primary school teachers in Emining Division, Baringo County, Kenya.

Corporate governance and default risk in financial firms over the post-financial crisis period: International evidence

This paper investigates the relationship between default risk and corporate governance for financial firms in 28 countries outside of North America in the post-financial crisis period, where default risk is measured by both credit default swap (CDS) spreads and estimated by a Merton-type model. Reduced default risk helps the stock market rebound during the post-crisis period. Both internal governance variables, including institutional and insider ownership, board composition and CEO power, and external regulatory factors, are examined and they show significant effect on default risk. In addition, the impacts of various governance variables are continent-specific: they have a higher impact on default risk for Asian firms than for European firms. Regulatory factors are important moderators of the governance mechanisms for banks: higher Tier 1 capital ratios reduce both CDS and fundamental default risk; recipients of secret emergency loans from the US Federal Reserve System (the Fed) exhibit lower CDS spreads post-crisis but higher fundamental default probabilities.

EFFECTS OF UNSECURED PERSONAL LOANS ON HOUSEHOLD FINANCIAL HEALTH OF PRIMARY SCHOOL TEACHERS IN EMINING DIVISION, BARINGO COUNTY, KENYA

Credit facilities include both secured and unsecured loans. For employees, unsecured personal loans have become more popular due to the relative ease and speed at which they can be obtained. The study focused on three areas namely: evaluate the effects of school fees loans on household financial health of primary school teachers in Emining division, assess the effects of home improvement loans on household financial health of primary school teachers in Emining division, examine the effects of emergency loans on household financial health of primary school teachers in Emining division and establish the effects of development loans on household financial health of primary school teachers in Emining division. The study used descriptive research design. Purposive sampling was used to obtain a sample of 165 respondents, 5 teachers from each of the thirty-three primary schools, in Emining Division, Baringo. A questionnaire was used to collect primary data from the respondent. Correlation analysis was conducted to test the study hypotheses. Results of the study showed that there is a statistical significant positive relationship between unsecured personal loans and household financial health. In particular, there is a statistical positive association between school fees loans, home loans, emergency loans, development loans and household financial of primary school teachers. The study concludes that unsecured loans contributes to the wellbeing of primary teachers.

CEO compensation and risk-taking at financial firms: Evidence from U.S. federal loan assistance

We examine whether risk-taking among the largest financial firms in the U.S. is related to CEO equity incentives before the 2008 financial crisis. Using data on U.S. Federal Reserve emergency loans provided to these firms, we find that the amount of emergency loans and total days the loans are outstanding are increasing in pre-crisis CEO risk-taking incentives – “vega”. Our results are robust to accounting for endogeneity in CEO equity incentives and selection of financial firms into emergency loan programs. We also rule out the possibility that our results are driven by a bank's funding base, bank complexity, CEO overconfidence, or matching of CEOs to select banks. We conclude that equity incentives (vega) embedded in CEO compensation contracts were positively associated with risk-taking in financial firms which resulted in potential solvency problems. We also find some evidence, although somewhat weaker, that higher incentive alignment (“delta”) mitigated such problems in those financial firms.