Loans For Purposes Research Articles

Bayesian Estimation of Fixed Effects Models with Large Datasets*

AbstractIn hierarchical prior longitudinal models, random effects are estimated by the Gibbs sampler. We show that fixed effects can be handled by a similar Gibbs sampler under a diffuse prior on the unobserved heterogeneity. The dummy variable approach for fixed effects is computationally intensive and has the out‐of‐memory risk, while the Gibbs sampler can reproduce the dummy variable estimator without creating dummy variables, and therefore avoids the memory burden. Compared to alternating projections and other classical approaches, our method simplifies both inference and estimation of the limited dependent variable models with fixed effects. The proposed method is applied to a real‐world mortgage dataset for classification with three‐way fixed effects on banks, regions, and loan purposes.

Loan Eligibility Prediction Using Machine Learning

Abstract: Lending research has become a highly essential research area since it may assist prevent loan defaults and grant loans to those who would pay on time. Therefore, for it though, we devised a technique for machine learning known as the random forest method, and also the data was used in this. Whatever is necessary is gathered from internet sites, and the data gathered is normalized before being employed for researching and predicting output, and it is then delivered to the random forest method, which is employed in our research. Following that, we may use the program to determine if a person is eligible for a loan or not, and a bank might not exclusively target the wealthy. Clients are accessed for loan purposes, but it also accesses other aspects of a client, that play a significant role in credit giving choices and lending prediction tax evaders.

The Right Purpose on the Right Covenant: Does the Loan Purpose Affect the Debt Covenant Through the Ṣukūk Rating?

Purpose — This paper aims to determine the influence of the purpose for issuing ṣukūk (operations, financing, and investment/acquisition) on different types of debt covenants (balance sheet, income statement, and collateral-based covenants). It also examines the ability of the ṣukūk rating to mediate the relationship between loan purposes and debt covenants. Design/Methodology/Approach — The research data were 236 ṣukūk that were listed on the Indonesia Stock Exchange (IDX) until December 2020. They were collected through the IDX official website. Logistic regression and the Sobel test were used to test the direct and indirect influences among the variables studied. Findings — The results showed that loan purposes affected the types of debt covenants. Loans for operational purposes seemed to be in accordance with the debt covenant with restrictions on income statement (IS), balance sheet (BS) and collateral. Loans for investment/acquisition were more appropriate to both BS and collateral-based debt covenants, while loans for financing were better suited to BS-based debt covenants. This study also proves that the ṣukūk rating could mediate associations between loan purposes, especially for investment/acquisition, and the types of debt covenants. Practical Implication — This research is useful for ṣukūk investors to consider the investment by looking at the purposes, ratings and ṣukūk covenants. In addition, it is helpful for ṣukūk holders, represented by trustees, in determining debt covenants in the form of ṣukūk with different purposes. Research Implication — The results of this study described how accounting information improved contract efficiency. This research provided important evidence of the association between the structure of debt covenants and loan purposes. It provided empirical evidence of the debt covenant hypothesis in agency theory on the importance of designing debt contracts to reduce monitoring costs. Originality/Value — This study employed the debt covenant on ṣukūk in Indonesia. The use of the ṣukūk rating as an intervening variable between loan purpose and debt covenant has not been studied previously. This study also divided debt covenant into four types by adding the collateral-based debt covenant because ṣukūk are different from other types of debt and require underlying assets in their issuance.

Providing Document Delivery/Interlibrary Loan Services from Within a Pandemic: Filling in the Gaps

ABSTRACT On March 11, 2020, the World Health Organization (WHO) characterized the alarming spread and severity of the coronavirus disease 2019 (COVID-19) as a pandemic. Responding to university directives, as well as professional association recommendations, many academic libraries not only suspended in-person services but also barred access to physical collections for interlibrary loan purposes. Such decisions had a significant impact on interlibrary loan (ILL) operations around the world. This paper describes how the University of Louisville’s Kornhauser Health Sciences Library (KHSL) not only maintained a continuity of ILL services but also expanded those services worldwide.

How Does the Urgency of Borrowing in Text Messages Affect Loan Defaults? Evidence from P2P Loans in China

In P2P loans with information asymmetry, the text information described by the borrower plays an important role in alleviating the information asymmetry between borrowers and lenders. To explore the borrowing described in text information and its relationship with default behavior, this article selects credits from April 2014 to October 2016 as the repayment period and studies default data. This is performed based on the length of the excavated text, purpose of the loan, repayment ability, willingness to reimburse, five text variables, and degree of loan urgency. The empirical results show that text length has a significant negative correlation with the default probability of borrowers. Different loan purposes have different default risks. Interestingly, the more urgent a loan is, the more likely the borrower is to default. However, repayment ability information and repayment willingness information have no significant effect on default behavior. In addition, the Nagelkerke R2 improved by nearly 3% in the logistic regression model with the addition of text variables. In short, fully excavating loan description information is helpful in reducing the risk of loan default.

Innovation, Institutions, and Social Change in Peer-to-Peer Lending: Evidence from China

In this chapter, we focus on the development of the peer-to-peer (“P2P”) lending industry in China. As a modern borrowing platform, peer-to-peer lending allows clients to obtain funding from peer lenders for a multitude of loan purposes, including credit consolidation, personal purchases, and the development of business ventures. However, the speed at which this industry has grown has created numerous problems for regulatory agencies, particularly in China, the largest peer-to-peer lending market in the world. Our chapter examines how lenders in the Chinese context continue to function as formal institutions regulating this sector continue to grow following a series of highly-publicized illegal lending activities in recent years. Additionally, we determine whether implemented regulatory measures are providing an overall benefit or detriment to the Chinese P2P lending industry. Finally, we highlight the potential for positive social change and social entrepreneurship arising from P2P lending, particularly in terms of the empowerment of traditionally disadvantaged groups by providing access to capital. We use the peer-to-peer lending industry in the United States, currently the second-largest in the world and one operating in a highly-regulated financial industry, as a comparison for the Chinese case.

Retail Loan Under Interest Rate Fluctuation in Nepal: Costumers Interest, Challenges and Managerial Solutions

Globally, interest rates play an important role in banking loans for all types of customers. In the present context, the banking sector is growing in Nepal. Banking sector is being popular for saving and retail loan purposes among the people of Kathmandu valley. Now a days, retail banking loan is being considered as one of the most innovative financial services provided by the various banks and financial institutions. This paper presents dimensional analysis of retail loan under interest rate fluctuation in Nepal. Respondents for the study were chosen using convenience sampling and random sampling methods. Convenience sampling was primarily used to select bank employees, while random sampling was used to select bank customers. The structured questionnaire, expert opinion, and pre-test interview are research instruments used in the study to collect data from bank employees and customers of Karhmandu valley. This paper reveals that youth and highly educated people are more attracted towards the retail banking products. Most of the respondents focus that there is a challenge in retail loan.

Filling the voids left by the formal sector: informal borrowings by poor households in northern mountainous Vietnam

PurposeThis study aims to examine the accessibility, loan purposes and effects of informal credits on poor households in Northern mountainous Vietnam.Design/methodology/approachThis study used primary data collected directly from surveying 402 poor households in Thai Nguyen province using a well-designed questionnaire. The probit model is employed to specify which factors affect access to informal credit, the tobit model is used to estimate the borrowing functions specified. In addition, descriptive statistical analysis is also used to describe the accessibility, purposes and effects of informal credit on poor households.FindingsThe results show that there is a considerably high proportion of informal borrowings from relatives, neighboring villagers, professional moneylenders, rotating saving and credit groups, trade credits and mortgages. Labor force ratio, social capital and residential land areas are the key determinants of poor households' informal borrowings. The purposes of borrowing are diverse. The informal loans also have certain significant effects on poverty reduction and the welfare of poor households.Research limitations/implicationsThe effects of the informal loans on house welfare should be quantitatively evaluated.Practical implicationsThe findings from these analyses allow us to draw relevant policy implications for the development of rural finance in other low-income, developing countries.Originality/valueThis research contributes to the body of published literature in several ways. Firstly, it provides understanding of the performance of the informal financial subsector. Secondly, the informal subsector of rural finance is evaluated in close relation to the formal subsector.

Important factors determining Fintech loan default: Evidence from a lendingclub consumer platform

This study examines the default determinants of Fintech loans, utilizing a sample of more than a million of personal loans that were originated through the LendingClub consumer platform during the period 2007–2018. We identify a robust set of contractual loan characteristics, borrower characteristics, and macroeconomic variables that are important in determining the likelihood of default, such as loan maturity, homeownership, loan purposes, occupation, etc. We also find an important role of alternative data in determining the default, even after controlling for the obvious risk characteristics of the borrowers, loan characteristics, and the local economic factors. The results are robust to different empirical approaches. Results imply that it would be important for regulators to provide greater transparency in terms of guidance and regulatory clarity on which alternative data can be used legally without violating fair lending rules. Lenders need to pay closer attention to how they make decisions and understand their own decisions that may be driven by complex algorithms inside the “black boxes.”

ANALYSIS FOR THE PURPOSE OF CREDIT

This topic addresses the financial analysis of a business for lending purposes. Often a business is analyzed as a potential borrower. The lending activity by the financial institutions is complex and in itself contains other elements besides the sound analysis of the financial statements. These other elements are: recognition of the applicant's activity for the loan or its past repayment. The handling of many elements will help the analysts with the purpose of lending. The analysis of financial assets is done by banks, credit analysts for credit granting. The financial statements and the analysis of financial indicators in an enterprise is carried out to make decisions. The analysis of financial statements and financial indicators is carried out to assist in providing reports, explanations to make a decision about the enterprise, whether it is worthwhile to acquire the shares of the enterprise, whether it is a credible creditor, if the investment in the bonds society is most valuable. The following issues will be addressed in this topic. Interpretation of Balance Sheet for lending purposes, analysis of short-term assets and working capital, valuation of inventories in the balance sheet, their importance in the lending process, Interpretation of the size of the receivables and the accounts payable and Interpretation of the Statement of Income for Loan Purposes.

Loan purpose and accounting based debt covenants

PurposeThe purpose of this paper is to investigate the association between the purpose of a loan and the type of debt covenants, separated into balance sheet-based and income statement-based covenants.Design/methodology/approachUsing private loan deal observations obtained from the DealScan database over the period between 1996 and 2013, the authors classify the sample loan deals into three categories based on the purpose of borrowing, namely, borrowings for corporate daily operating purposes, financing purposes and acquisition and investing purposes. The authors conduct multinomial logistic regression analysis to test the relationship between the choice of financial ratios in a debt covenant and the purpose of a loan, controlling for financing constraints and other factors that have been identified as important to debt covenant analysis in prior studies.FindingsThe results provide evidence that the purpose of the loan is significantly associated with the type of debt covenants, suggesting that the lender and the borrower have considered the loan purpose when structuring their debt agreements. More specifically, the results indicate that the loans borrowed to fund acquisitions or long-term investment projects are more likely to have income statement-based covenants and less likely to have balance sheet-based covenants. In contrast, the loans borrowed for corporate daily operating purposes or financing purposes are more likely to contain balance sheet-based covenants relative to income statement-based covenants.Research limitations/implicationsThe authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency. The results are limited to the US market with its institutional structure. In future studies, it would be interesting to perform similar investigations on firms in other countries.Practical implicationsThe findings contain important and economically significant implications indicating that loan lenders and borrowers agree to include different types of accounting information (that is, income statement- versus balance sheet-based financial ratios) in their loan covenants for different purpose loans.Social implicationsOverall, the results provide important evidence regarding the connection between debt covenant structure and loan purpose. In doing so, it contributes to the literature on debt contract design (Dichev and Skinner 2002; Chava and Roberts 2008; Demerjian 2011; Christensen and Nikolaev 2012). Despite much interest in debt contract design, Skinner (2011) argues that there still exists incomplete knowledge of the economic factors that structure debt contracts. Income statement-based covenants depend on measures of profitability and efficiency and act as trip wires that transfer control rights to lenders when borrowing firms’ performance deteriorates. On the other hand, balance sheet-based covenants rely on information about sources and uses of capital and align interests between borrowing firms and lenders by restricting the borrower’s capital structure. The authors show that loan purpose is significantly associated with the choice between income statement-based and balance sheet-based covenants. This result further illustrates ways in which accounting information improves contracting efficiency.Originality/valueThis study is the first to identify differences in trends over time for the use of income statement- and balance sheet-based covenants as it relates to different loan purposes. The authors build on prior research to examine the degree to which loan purpose is associated with the choice between income statement-based and balance sheet-based covenants.

The gender gap in over-indebtedness

We document a significant gender gap in over-indebtedness, as we find women to be less likely to become over-indebted even after controlling for risk attitude, financial literacy and socio-demographic characteristics. However, once we account for loan purposes the gender gap diminishes. Our findings highlight the importance to account for loan purposes when analyzing individuals’ debt behavior.

Characteristics of Mortgage Terminations: an Analysis of a Loan-Level Dataset

Understanding mortgage termination behavior is crucial for valuating mortgage-backed securities. Analyzing a unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behaviors in the Korean housing and housing finance markets. We also analyze mortgage termination behaviors across regions, loan purposes, and periods. The results suggest that the prepayment rate of fixed-rate mortgages (FRMs) and the ratio of adjustable-rate mortgages to FRMs can provide meaningful signals for the Korean household economy. Although the macro-prudential policies pertaining to the loan-to-value ratio (LTV) and debt-to-income ratio (DTI) are very effective, their effects can vary depending on the region or loan purpose. Furthermore, the DTI and credit score cannot always identify the default risks of mortgages not intended for housing purchases even though such mortgages are more vulnerable to macroeconomic changes. The observed changes in default behavior indicate that the government’s policies to promote fixed-rate loans have achieved a certain degree of success.

Characteristics of Mortgage Terminations: An Analysis on the Loan-Level Dataset

To valuate mortgage-backed securities, it is crucial to understand mortgage termination behavior. Analyzing the unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behavior in the Korean housing and housing finance markets. We find that loans to individuals with unhealthy financial characteristics—for example, a high loan-to-value ratio, a high debt-to-income ratio, a lower credit rate, or a high excess premium—have a higher prepayment risk in the Korean market, which contrasts with the findings on developed markets. The results of subsample tests across regions, loan purposes, and periods indicate that the prepayment risk in a high median price-to-income ratio region is sensitive to mortgage rates, whereas the prepayment risk in a low median price-to-income ratio region is sensitive to housing prices. Mortgages for purposes other than purchase or refinance are less sensitive to financial benefits in prepayment decisions. Prepayment and default behaviors have also changed over time.

On the Impact of Leveraged Buyouts on Bank Systemic Risk

Although banks are at the center of systemic risk, there are other institutions that contribute to it. With the publication of the leveraged lending guideline in March 2013, the U.S. regulators show that they are especially worried about the private equity firms with their high-risk deals. Given these risks and the interconnectedness of the banks through the LBO loan syndicates, I shed light on the impact of a bank’s LBO loan exposure on its systemic risk. By using 3,538 observations between 2000 and 2013 from 165 global banks, I show that banks with higher LBO exposure also have a higher level of systemic risk. Other loan purposes do not show this positive relationship. The main drivers influencing this relationship positively are the bank’s interconnectedness to other LBO financing banks and its size. Lending experience with a specific PE sponsor, experience with leading LBO syndicates or a bank’s credit rating, however, lead to a lower impact of the LBO loan exposure on systemic risk.

An Analysis on Borrowing Behavior of Rural Households in Vientiane Municipality: Case Study of Four Villages

Since the late 1990s the savings groups have been introduced in the villages of Laos. This movement has offered new borrowing opportunities for the rural people. Based on household survey using a structured questionnaire in four study villages (N=684) in Vientiane Municipality during 2007–08 we analyzed the role and performance of the savings group in rural financial markets, especially focusing on who borrows, from which sources, and for what purposes by comparing the savings group with informal and formal lenders. Two major findings are as follows. First, three types of lenders (savings groups, formal and informal lenders) have their own particular features, and thereby loan purposes differ significantly. Formal banks offer loans exclusively for production purposes, while informal lenders do for coping with emergencies. Savings groups fall between them. Second, though poor households are reluctant to be a savings group member, once they participate in they actively obtain loans from it. In contrast, though rich households actively participate in the group, they obtain loans less from it. Group members claim that the primary purpose of joining the savings group is to cope with emergencies. When the members obtain loans from the savings group, however, nearly 40% of the loans are used for production purposes, mainly in agriculture. There exists a change between saving purposes and borrowing ones. It is assumed that in villages with the higher loan credit for production purposes, the savings groups show favorable performance, and thus a rapid growth.

Determinants of Success in Online Social Lending: A Peak at US Prosper & UK Zopa

This paper examines social or peer to peer lending in two platforms, Prosper in the United States and Zopa in the United Kingdom. The hand-collected sample consists of 600 random loan requests -- 300 in each platform -- in different stages of fulfillment during the month of February 2011. The results show significant platform differences in terms of basic common characteristics such as loan amount, maturity and interest rate, as well as credit rating and borrower experience. Furthermore, the different measures in the speed of funding emphasize the importance of credit risk in both platforms as well as the likely use of rules of thumb by retail lenders. Lenders appear to have limits in the capital invested per loan and fund more slowly loans with lower credit ratings and loan purposes that may be related to lower credit scores. In the case of Zopa, besides lending more slowly, they also propose higher rates. Overall, evidence suggests that there are commonalities but also significant differences between Prosper in the US and Zopa in the UK.

Microcredit Banking Practice: Insights from a Cambodian Microfinance Institution

This article examines the determinants of the nominal value of loans in microcredit and the factors that drive long-term relationship banking. The dataset is drawn from primary data gathered from 216 randomly selected borrowers in a Cambodian microfinance institution. Analysis is performed using an OLS regression model.The results confirm positive and significant impacts of real estate assets and loan purposes on the amount borrowed and a negative impact of being single as a civil status. Long-term relationships are positively affected by: age of borrower and purpose of loan; and negatively affected by female gender.Contrary to general belief that microcredit is targeted to the “poorest of the poor”, a new market segment in microcredit was discovered within which MFI might target low-income/asset backed clients, granting loans on a “sustainable” basis, by applying the fundamental criteria of commercial banking: assessing credit worthiness and loss given default.

Valuation Inaccuracy: An Examination of Causes in Lagos Metropolis

Valuation plays essential roles in the property market either for loan purposes, sale transactions, and portfolio management or performance measurement. Previous studies had established that there was valuation inaccuracy everywhere in the world, including Nigeria. This study examined the causes of such inaccuracies. Survey approach was used in carrying out the study. 150questionnaire was retrieved out of 300 questionnaire (i.e. 50%) administered on the respondents selected from the Nigerian Institution of Estate Surveyors and Valuers’ Directory and this was used for the analysis. Descriptive statistics was employed in the analysis of the data collected. The study revealed that valuation inaccuracy in Lagos Metropolis result from dearth of market evidence (data), use of outdated valuation approach and clients’ influence. The study established that Valuers in the metropolis engaged in general practice. The paper recommends that Nigerian Valuers should join hands in providing centrally organised databank which will reduce the level of inaccuracy in valuation.

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