Loan Institutions Research Articles

Developing a Data Science Approach to Detecting Income Fraud for the Peer to Peer Loan Industry

Personal loans can be obtained by borrowers from very different types of lending institution. The most common are a traditional loan institutions, payday lenders, or a Peer to Peer (P2P) lending brokers. P2P lending companies do not loan the money directly. They link the borrower to a lender and provide the lender with the borrower’s income which is not usually verified. The P2P lenders collects fees based on the transaction and financially benefits from a higher number of introductions of borrowers and lenders. P2P lending is becoming more popular among borrowers because the pay highest interest rates are much lower than payday lenders and loans require less verification of income and assets than traditional loan institutions. A higher reported income with P2P lenders can result in a larger loan for the borrower and thus more profit and fees generated for the P2P lender. If the loan defaults due to an overstated or fraudulently reported income by the borrow, the P2P lender does not suffer, it is the lender that was matched to the borrower by the P2P lender that will incur the financial loss. This paper focuses on proposing a data science approach to detecting loan applicants that provide fraudulent income data to P2P lenders. The data obtained for this study contained 887,379 observations and 74 variables of loan applicants from the P2P loan company, Lending Club. The initial observations of this data showed that unverified loans make up 23% of the defaulted loans while verified and source verified loans made up about 77%. Described within this paper is how the data set for analysis was obtained and prepared for analysis, the initial findings, the proposed data science approach to fully analyzing this data, and the significance of the lending industry, both traditional and P2P, with a method of detecting fraudulent income reported on loan applications. Models generated from this analysis could be incorporated by lenders into their applications along with research in this area should improve the P2P lending industry by increasing the detection of fraudulent income reported on loan applications.

Receivables Management and Possible Use of Information Technologies

This paper is focused on receivables management and possibilities how to use available information technologies. The use of information technologies should make receivables management easier on one hand and on the other hand it makes the processes more efficient. Finally it decreases additional costs and losses connected with enforcing receivables when defaulting debts occur. The situation of use of information technologies is different if the subject is financial or non-financial institution. In the case of financial institution loans providing is core business and the processes and their technical support are more sophisticated than in the case of non-financial institutions whose loan providing as invoices is just a supplement to their core business activities. The paper shows use of information technologies in individual cases but it also emphasizes the use of general results for further decision making process. Results of receivables management are illustrated on the data of the Czech Republic.

Analyzing the Causes and Evolution of Loan Delinquency/Arrears within Microfinance Institutions. A Critical Path of Action.

This paper investigates the impact of External Factors (EF) on the Loan Delinquency (LD) of Microfinance Institutions (MFIs). Drawing upon a field level survey developed in line with Likert scale (5) and conducted in 2014- 2015 to 416 respondents in 78 MFIs located in seven different regions of Cameroon, the paper examines if external variable such as Legislative Issues (LI), Economic Contagion (EC) and Economic Down Turn (EDT) are root causes of loan Delinquency in MFIs. While acknowledging other contributing factors to LD such as late disbursements, poor timing, high interest rate, poor training to staff/ beneficiaries, management inefficiency etc. Multiple regression analysis was used to establish relationship between LD and the identified external factors. The regression results obtained indicates Legislative Issue is the core external cause of Microfinance Institutions Loan Delinquency. Contagion Effect and Economic Downturn were identified to be statistically insignificant. Therefore, we conclude that in addition to profit motive (internal cause), LI as an external factor contribute significantly to the alarming rate of Loan Delinquency in Microfinance institutions. To overcome this challenge requires a collective effort both from the regulatory authorities, the government the banking commission and above all the general assembly of these institutions. The paper finally contends that major stakeholders in our sampled institutions have failed in their roles to strengthened MFIs sufficiently to cope with rising challenges in the market. The paper considers delinquency management as a gauge not only for MFIs sustainability but as a means to boost deteriorating customers’ confidence.

Assessment of a credit scoring system for popular bank savings and credit

The current banking system does not meet the needs of financial services, particularly credit to the poorest sectors of society, the banking presence are mainly located in cities and regions with important economic activity, to attend to these excluded sectors have created naturally without supervision and support of the authorities, financial institutions such as credit unions, cooperatives, popular financial companies, among others, called savings banks and loan altogether. However, most of these institutions are not recognized or supervised by the CNBV, which translates into risk for users of services to financial institutions, highlighting the inefficiencies in their lending processes, and decisions to accept or reject a credit application is based on knowledge, experience and judgment of the loan officer. This paper presents the evaluation of a credit scoring system11The project of credit scoring system includes: analysis of credit process, design and development of system, marketing, training, fine tuning, delivery and service provider. in terms of cost-efficiency for savings and loan institutions in specific for SOFIPO's and in terms of cost–benefit to the service provider assessment of loan applications. As will be shown in the development of a system work of this nature streamlines the lending process at minimal cost and is a worthwhile investment for the provider of credit scoring services.

A tale of two crises: Germany’s Landesbanken and the United States’ savings and loans

This research compares the experiences of financial institutions in two very different financial crises: savings and loan institutions (S&Ls) in the United States during the 1980s and Germany’s state-owned banks, known as Landesbanken, during the global recession of 2007–2008. While much of the research on bank failures centers on the choices made by public and private actors according to their interests, this research focuses on the relationship between the ideas that drive an economic entity and the institutions that hold the economic entity accountable. The article argues that while the crises were very different, there is a causal thread that connects the two. Landesbanken and the S&Ls experienced a similar disruption in the complementarity between their original mission and their regulatory framework. The disruption contributed to increased volatility, weak oversight, and greater dependence on third parties and bank managers for risk information.

Global Regulatory Changes to the Banking Industry after the Financial Crisis: Basel III

The enforcement of new regulations has traditionally been the governments’ strategy to respond to episodes of financial stability. That was the case in, for example, the United States after the market crash that detonated the 1930s “Great Depression”, with the Glass-Steagall Act, which separated commercial banks from investment banks to eliminate the risk that a stock market collapse could generalize and affect the banking industry.Many years later, the scandals of the Savings and Loans institutions, during the late 1980s, brought about more restrictive regulations on that sector; or the Enron, Xerox, Tyco and others’ fraudulent scandals at the beginning of the 21st century that were at the origin of the Oxley-Sarbanes legislation. Recently, the “Subprime-Mortgages Financial Crisis” of 2007-2009, once again, provoked an encompassing financial sector regulatory revamp in major industrialized countries, home of the largest multinational banks, which were the intermediaries most affected by the crisis, provoking ripple effects across many other countries, and raising the odds that, for the first time, the financial industry’s regulatory framework will finally achieve a supra-national status. It would be a logical corollary to the enormous economic costs and the dramatic loss of confidence that resulted from the global financial crisis. An increasingly globalized financial industry desperately needs a full revamping of its regulatory framework.

Firm Growth, Capital Choice Preferences, and Impact on Performance: Evidence from the SME Industry

Small and Medium Enterprises (SMEs) have differential preference of various funding sources depending on the stage of growth cycle they are in. Quite a few researches have been carried out to decode the link between various funding sources and performance. This study differs from existing literature by studying the impact of funding sources on performance through various growth stages. The paper also adds to the existing literature on SMEs’ preferences towards various funding sources. We have used six years’ (2007-2012) data for 287 manufacturing firms. Based on their growth, we have divided them into three groups, namely, low, moderate and high growth firms. Path modeling technique is used to study the intertwined relationship among the variables. We also develop a growth-performance meter which is a scale that measures the impact of funding sources on performance and efficiency of SMEs at different growth stages. The results show that, internal finance, and institutional finance have a significant role in enhancing the performance of low growth firms. But, the role of institutional finance fades away as the firm move up the growth cycle. It has a negative impact on performance of high growing SMEs. Alternately, non-institutional finance contributes to better performance of high growing SMEs establishing the importance of external debt to high growing firms. Volatile earnings of high growing firms is seen as a reason to cause procedural inconvenience and delay in obtaining formal institutional loans at right time to enable them to grab opportunities. Conversely, volatility (taking risk) is found to increase its performance and efficiency. The positive impact of collateral asset on institutional borrowing also indicates that only secured loans are available to risk taking high growth firms which falls as a constraint. It provide implication to policy makers to sort out a way to make formal institutional finance available to high growing firms to enable them take risk and grow faster.

Revealed Institutional Risk Preferences in Thrifts

We examine institutions’ revealed preferences towards default risk in publicly traded savings and loan institutions (S&Ls or thrifts). We test whether institutions consider default risks to be fairly priced, and therefore do not mind holding thrifts exposed to it. Our tests avoid the problems associated with measuring risks and returns ex-ante versus ex-post. An important underlying assumption of the distress anomaly is that financially distressed firms tend to cluster, preventing investors from diversifying away their risks. During the two financial crises, thrifts clearly met this criteria. We find statistically significant evidence for an inverse relationship between institutional ownership and thrift default risk. We also find statistically significant evidence that institutions increase ownership during financial crises. Our results hold for fixed effects and three stage least squares (3SLS) regressions as robustness tests to deal with missing variable bias and endogeneity between default risk and institutional ownership.

Income, saving, investment, and consumption pattern of farm households in Karnaldistrict of Haryana

The findings of the study revealed that on an average, the operational holding was 3.34 ha which varies between 1.40 ha to 7.24 ha on small and large category of farms and land rent was found to be `75916 per hectare. The leased in land was higher on large farms (1.23 ha), followed by medium (0.37 ha) and small category of farms (0.06 ha). More than seventy per cent farmers highlighted that lower income and savings, lower access to institutional credit and inadequate loan, higher cost of new machinery, lower output prices of agricultural crops, higher prices of inputs, higher rate of interest, higher family consumption expenditures, higher cost of education and small size of holding hindered the capital formation on farms. Hence, there is a need to encourage the investment on farms through liberal financing at lower rate of interest and making higher public investment on agricultural infrastructure development. The investment on productive farm assets was having positively significant relationship with income earnings and size of operational holding, while, non-significant with literacy and age of the respondent.

The Application of Hadoop in Natural Risk Prevention and Control of Rural Microcredit

Rural microcredit means that the loan institutions extend the small amount of loans to the farmers. The purpose of rural microcredit is to meet the increasing needs of agriculture, animal husbandry, aquaculture, and the other business activities associated with the rural economic development. However, the rural microcredit is currently facing severe problems, such as operation risk, business risk and natural risk. Of those risks, the natural risk of rural microcredit has the most different forms and complex relationships, and the effective coping strategies lack of controllability. In the event that we can’t control and make up the losses from natural risks, it will cause the rural incomes and productions stepping down; and there is no way to get any compensation from the other capital, and this will cause the farmers can’t pay the principal and interest. As a result, natural risk prevention and control become a very important issue in rural microcredit. This paper analyzed the original cause of formation and characteristic of natural risk, and discussed how to predict the natural risk in rural microcredit. Finally, we gave the result and performance evaluation, and provided various methods to defend against the natural risk.

Do Credit Default Swaps Affect Lending Practices? Evidence from Syndicate Structures and the London Whale Incident

This paper tests the monitoring concentration hypothesis that loan participants can transfer monitoring incentives back to lead arrangers by purchasing credit default swaps (CDSs) from lead arrangers with the capacity to sell such contracts. Monitoring concentration appears to play a significant role in reducing lead arrangers’ loan allocation, expanding syndicate size resulting in larger loans for borrowers, and increasing the usage of covenants. Other loan CDS dealers participating in the same syndicates dilutes the role of CDS in monitoring concentration because these dealers can also sell CDSs to non-dealer participants. The evidence is further supported by two robustness tests — the analysis of traditional term loans and the London Whale incident. Among the three types of loan facilities, traditional term loans have the highest likelihood that CDSs are purchased by the participant lenders because banks tend to keep these loans on their balance sheets. On the other hand, institutional term loans, which are arranged with the intention to be securitized or sold to institutional investors, are less likely to have CDS protections purchased by original participant lenders. In contrast to term loans, revolvers are lines of credit, i.e., the amount of loans may not be drawn. Therefore, participant lenders also have less need to purchase CDS protections. The above main findings are driven by traditional term loans. However, there are spillover effects to revolvers that are in the same loan packages with traditional term loans. The London Whale incident, which caused JP Morgan more than $6 billion trading losses in the CDS market, presents a unique opportunity to examine the effect of CDS on lending practices. During the event quarter, there is a clear shift of lending activities from CDS selling banks to non-CDS selling banks. In addition, arranger allocation increases and syndicate size reduces among CDS selling banks relative to non-CDS selling banks. The fact that not only the lending practices of JP Morgan but also those of other CDS selling banks are affected suggests a general mistrust of using CDS protections, which in term affects the loan syndicate structures of CDS selling banks. However, the effect is transitory and reversed during the following quarter. Overall, the findings indicate that financial innovations, such as CDSs, can profoundly impact banking practices.

Impact of Income Generating Projects on Family Income and Expenditure in South Kivu, Democratic Republic of Congo

Grassroots development projects in rural and suburban areas in Africa tend nowadays to focus on the fight against poverty. Many projects are developed based on the assumption that providing families with opportunities to increase their income through income-generating activities is an effective way of empowering them to sustainably improve their living conditions. This research was conducted in South Kivu Province, in the Democratic Republic of Congo (DRC), to gauge impact of project-supported income generating activities on family income and expenditures. The research compares family income and expenditures before 2006 and the situation 5 years later for families that have received support for income generating activities. Based on case studies, interviews and participant observation, the research confirms that introduction of institutional loan has created new employment opportunities, which in turn has boosted the income level of the grass roots households at present. There is significant contribution to the changes from additional external assistance received, infrastructural facilities developed, socio-political and cultural influence and the physical and mental capacities improved during the present period. It is quite clear here that the outlook of the present period households has been changed to handle the everyday kind of family problems to build up their future plans.

POTENSI SUMBER DAYA DAERAH DAN KESEJAHTERAAN KELUARGA TKI

The objective of this study was to investigate the local resource potential and migrant workers’ family welfare. The data were analyzed through Structural Equation MODELING (sem) or so-called Linear Structural Equation (LISREL) to measure the connection of resources in the workers’ origins and poverty. The results show that both human dan natural resources do not significantly affect the walfare of migrant workers’ families. Hence, the Local Government (Regency) is expected to increase financeial resources such as banking institutions, cooperatives, savings and loan institutions, finance and so on, besides increasing the number of physical resources such as markets and roads.

Institutional Investors in Corporate Loans

I examine the corporate financing implications of nonbank institutional investors entering the market for corporate loans. Institutional loans have served primarily as a substitute for bank debt and corporate bonds rather than increasing leverage. When the supply of institutional loans increased in the years before 2008, firms decreased their use of other debt, a pattern that was reversed in the years immediately after 2008. The results have implications for understanding how shocks to the supply of credit affect corporate balance sheets and how to view the emergence of institutional investors into the market for corporate loans.

ANALISIS POTENSI PENGEMBANGAN USAHA PETERNAKAN SAPI PERAH DENGAN MENGGUNAKAN PARADIGMA AGRIBISNIS DI KECAMATAN MUSUK KABUPATEN BOYOLALI

Population enhancement of dairy cattle could be done in a region supported by potential of its own region for the development of dairy cattle. The potencies of the region for dairy cattle enhancement could be done through provide feed availability, human resource knowledge, milk demand, income of the farmer, market infrastructure, loan institution role and local government policies. The purpose of this research was to determine the condition of the dairy farm in sub system of agribusiness in district of Musuk, and the factors that affecting the income of dairy farmers. Twenty villages in Boyolali regency were choosen as survey location. The respondents were chosen by random sampling method, with 6 respondents each village. There were 120 farmers of dairy cattle farmers were chosen in this research. Observation and direct interview methods were used to collect the data. Result of the research showed that income average of the farmers was Rp228.991,27/AU/month. Value of eficiency R/C Ratio was 1.28. Analysis of linear regression showed that age of farmer, total milk production and cost of feed significantly influence the income of dairy farmer. LQ value of dairy catlle population was 10.67 and LQ value of forage was 1.075. Analysis of SWOT showed that total score for internal external factors were 3.15 and 3.18. The result showed that dairy cattle have a potential to be developed in Musuk subdistrict. (Keywords: Dairy cattle, Sustainability paradigm, Income, SWOT, LQ)

AIG's announcements, Fed's innovation, contagion and systemic risk in the financial industries

We examine the effects of the American International Group, Inc.’s (AIG's) loss announcements and the Federal Reserve's subsequent innovation in the financial sector. Analysis of seemingly unrelated regression on the returns of four financial industries – banking, insurance, brokerage firms and savings and loan institutions (S&Ls) for the period 5 September 2007 to 31 December 2008 reveals that, the Federal Reserve's announcements on 16 September 2008 and on 8 October 2008 to pledge $85 billion and $37.8 billion, respectively, to save the AIG, have the most impact on the financial industries. All four industries are sensitive towards shocks in short- and long-run interest rate returns and market returns. We find evidence of significant contagion effect between insurance and banking industries and incremental systemic risk in all financial industries after the bailout by the Federal Reserve. We do not find any significant evidence supporting the Federal Reserve's perception of AIG to be too-big-to-fail.

The Louisiana State Museum's Loan Resolution Project

A team of dedicated staff recently completed a two-year project that resolved over 7,000 loans at the Louisiana State Museum. These included loans that had been left in the museum's care for long periods of time and had never been returned or reclaimed; loans whose lenders had passed away and that had never been claimed by heirs; or institutional loans from institutions that no longer exist. Several factors came into play including a lack of proper documentation going back to the museum's founding over 100 years ago, changes in accessioning practices, and collections moves. This article will discuss the history of the various issues related to long-term loans at the museum, the methodology of the project, and some results and lessons other museums and archives professionals might take away from our experience.

'Bank' Loan Ownership and Troubled Debt Restructurings

This paper examines whether the number and type of lenders that participate in loan facilities are related to the nature of the troubled debt restructuring process. Using a hand-collected sample of debt restructurings both outside and within bankruptcy, we find that the likelihood of a successful out of court restructuring is significantly related to the identity of the firm's lenders. Overall, we find evidence that loans from traditional bank lenders are much easier to restructure out of court than loans from institutional lenders. Moreover, we find evidence that securitized commercial loans are more difficult to restructure due to holdout problems than publicly traded debt. Consistent with greater holdout problems in the institutional loan market, we find that reliance on institutional loans is positively related to the likelihood of a prepackaged bankruptcy.

Forecasting of the Influence of Financial Institutions Loan Portfolio Change for the Economic Sectors of the Country

Purpose of the article is to predict the interrelationship between the change of financial institutions loan portfolio and activities of the main economic sectors in Lithuania. Coherence between financial intermediation and economic growth cause a great interest of economists during the late decade. Prevailed opinion that banking sector is the reflection of economic growth and expansion and that its role - to intermediate in the saving and investing needs, reallocating funds between economic activities, was replaced by sentiment that strong and stable banking sector could be not only the result of economic development, but also the cause of this growth. The purpose of the article is to accomplish forecast of the influence of financial institutions loan portfolio change to the main economic sectors in Lithuania for 2013-2017 period.

Disclosure Practices In The Savings And Loan Industry: A Test Of The Signaling Hypothesis

Savings and loan institutions (S&Ls) have been able to use specialized regulatory accounting practices (RAP) which typically are more liberal than generally accepted accounting principles (GAAP). This paper examines whether differences exist between S&Ls which disclosed a reconciliation of their RAP and GAAP net worths and S&L which did not. It is predicted that the financially strongest S&Ls would be most likely to disclose this information. Reported results support this signaling hypothesis.