Loan Sources Research Articles

Are sovereign wealth funds “white knights”?

PurposeIn the continuing credit squeeze, sovereign wealth funds (SWFs) are still active in international lending and are eagerly sought out by large, cash‐strapped companies in the West. The purpose of this paper is to examine their nature and strategies before and after the onslaught of the credit crunch and global economic downturn in order to advise corporates on how best to design their strategies and terms in approaching the SWFs for funds.Design/methodology/approachAn analysis is made of SWFs in their dealings with Western corporate borrowers and a case study made of Barclays Bank which, faced with three major options in 2008 to raise a large amount of cash, chose to attract funding from three Gulf SWFs.FindingsSWFs certainly qualify as lenders of last resort (“white knights”), providing ready loans, albeit on premium terms, at a current time of severely restricted credit supply from other sources. Alternative sources of funds – stockholders and government bail‐out – also suffer from disadvantages relating to the characteristics of their loans.Practical implicationsCorporate borrowers should currently view SWFs as attractive “white knight” sources of loans when other providers are constrained. The analysis in this paper, including the experience of a major borrower, Barclays Bank, suggests that SWFs are demanding tougher terms as a result of their strong bargaining positions and historical losses, and that companies should tailor SWF loan contracts to contain maximum incentives and safeguards to produce successful results.Originality/valueThis is the first paper to analyse the new role and strategies of SWFs in the credit crisis context, as well as the required response of cash‐strapped companies seeking loans from them.

Rates for Vehicle Loans: Race and Loan Source

A household's vehicle purchases are among its largest expenditure outlays. Moreover, unlike housing purchases, which a typical household may make once or twice over a lifetime, a house? hold may well buy several cars over the same interval. The magnitude and relative frequency of vehicle purchases suggest that differential treatment by race in the vehicle market may have important implications for differences in wealth and financial well-being by race. Yet, whereas a robust literature in economics has studied virtu?

Comparative analysis of production costs and revenues of small-scale fisheries in Lagos Lagoon, Nigeria

The paper presents the results of a study on production costs and revenues of small scale fisheries conducted in Lagos Lagoon from January to December 1994. The fishing units comprised essentially of the gear types and accessories, craft/wooden canoes and a propulsion mechanism with either the outboard engine or paddle. The motorized or non-motorized canoe fisheries were operated with different gear types including gillnets, cast nets, traps, stow nets, lift nets, long lines, hand lines, beach seine nets and encircling nets. The capital investment and the operational costs for the non-motorized canoe fishery ranged between N7,250.00 for hand line and N42,750.00 for stow net fishery. Only 6.0% of the canoes were motorized and the cost of the outboard engine accounted for 38% of the capital assets for encircling net 43% for beach seine net and 72.4% for the gillnet fishery. The revenues generated depended on the fishing efforts as well as the quantity and quality of the catch. Annual return on investment was used in the analysis instead of the linear assessment of depreciation over the years mainly because of the traditional sources of loans which required payment within 1 year of operations. All the non-motorized canoe fisheries recorded profit margins at the end of the first year of operation with the minimum return on investment of 45.70% for hand line fishery. The motorized canoe fishery with encircling nets recorded high profit of 90.30%. Keywords : Production costs, revenues, motorized canoe. AJAZEB Vol. 6 2004: pp. 41-45

Residential Segregation and the Transformation of Home Mortgage Lending

This article shows that, after decades of inequality, the 1990s saw sudden and dramatic increases in lending to low income and minority groups. Drawing in part on the work of Williams, Nesiba and McConnell (2005), we argue that government deregulation, industry restructuring and government-insured loans all fueled this growth by increasing the sources of loans to minorities. We further argue that this increased lending had small but perceptible effects on residential segregation. But, the transformation of the home mortgage industry also gave rise to new lenders who were quite unlike the old. We contend that the nature of lending was even more important than the amount: some lenders and types of lending had much more of an impact on residential segregation than did others. Specifically, loans from traditional lenders tended to decrease segregation. Conversely, loans from subprime and manufactured housing lenders that specialized in serving low income and minority markets either had no statistically significant effect on segregation or even increased it.

Funding the home-based enterprise: Finance and credit in developing country livelihoods

Micro-credit is centre-stage in international development circles, not least because of the UN Year of Micro-credit in 2005. This paper examines data collected for a study of the environmental impacts of home-based enterprises (HBEs) to assess the nature of micro-credit use by their operators. Our case studies were of 150 HBE operators in each of the following locations: Surabaya, New Delhi, Pretoria and Cochabamba. Though micro-credit is available in each of our case study cities, we found much less use of any credit source, and many more problems of accessing micro-credit than might be expected from the literature. Only in Cochabamba was routine use made of such loans, but only by a minority of HBEs. Most HBEs are financed out of earnings from elsewhere, windfall gains and savings. Only in India were other loan sources, especially money-lenders, used to any great extent. Problems in accessing micro-credit included the extortion of bribes by bank officials, and a general debt-aversion by HBE operators, e...

Start-up financing, owner characteristics, and survival

We investigated the relation between the survival of new small businesses and bank loans. This was done using a model that included other loan sources, human capital variables, and company and industry descriptors. We found there is a negative correlation between having a bank loan and business survival, and a positive correlation between having a non-bank loan and survival. However, having a bank loan was a ceteris paribus positive predictor of the survival of start-up companies. Our findings enabled some inferences about the process of loan source selection by start-up business owners, and about the banks’ loan granting process.

Dimensions and dynamics of microfinance membership overlap – a micro study from Bangladesh

The microfinance market of Bangladesh is getting rapidly crowded. In certain areas there is also quite high incidence of households taking loans from a number of microfinance providers. Why is this happening? How does it affect the providers? What should be done? These are some of the questions that this paper begins to address based on data collected from BRAC's operations in Tangail. We find that a number of crises often gives rise to an urgent need for lump sums of cash, and this is why households often need access to several loan sources. Though repayment irregularity is found to be on the increase, somehow it is being managed from turning into a major default problem, suggesting a level of in-built resilience of the system. This needs further research. In terms of what should be done, we chalk a broad agenda consisting of better information-sharing mechanisms and developing better risk-responsive financial products. In this sense, the phenomenon of multiple microfinance membership is as much an opportunity as it is a challenge.

Abnormal Payment of Home Mortgages in Taiwan

Slightly delinquent payment and prepayment of home mortgage are frequent in Taiwan. Compared with other countries, the phenomenon is very special. This paper constructs a new home mortgage model that fits the Taiwanese situation of slightly delinquent payment and prepayment of home mortgage. In the model, a loan can be classified into seven financial states, including current, delinquent 8-30 days, delinquent 31-60 days, delinquent 61-90 days, delinquent 90+ days or default, prepayment and paid off. This paper attempts to use the matrix of transition probability among alternative states and, then, applies the logistic regression model and the multinomial logit regression model to analyze the influence of factors on abnormal payment and loan state transfer. Analytical results indicate that the following factors are significant in explaining abnormal payment: educational level, marital status, loan amount, loan-to-value ratio, loan source, and loan, status. Compared with other countries, educational attainment and loan status are particularly influential in Taiwan. Taiwanese financial institutions can use the results from this study when drafting administrative policies for home mortgages.

Namibian‐De Beers state‐firm relations: cooperation and conflict

This article argues that state‐firm relations are an increasingly important fact of international relations. Using a version of the obsolescing bargain model, it empirically examines the relations between Namibia and De Beers, particularly the bargaining that has occurred since independence. The authors conclude that Namibian independence markedly altered both the bargaining power and interests of the two sides. Independence gave Namibia the ability to create more effective legislation and economic structures to limit and guide its domestic diamond industry. At the same time changes in the international diamond world, particularly the growing challenge from Russia, weakened De Beers’ bargaining power and increased its need to solidify its African base. Once Swapo became the government, its interests also changed markedly. Before independence Swapo viewed the mining of its diamonds as an unmitigated form of exploitation by De Beers. After independence it needed De Beers’ technology, investments and access to international markets to provide the state with export revenues and its people with salaries. The changes in bargaining power and interests have brought about numerous, subtle, but still significant, changes in Namibian‐De Beers relations. While the 1994 Namibian‐De Beers agreement provided the most visible evidence of this change, as predicted by the obsolescing bargain model, the terms of the relationship have continued to evolve. To support these conclusions the authors found evidence of change in each of five major issue areas: ownership, marketing, revenues, employment and production. For now it means that the principal objective of Namibian diplomacy in the 1990s is going to be the promotion, through our missions abroad and by all other means, of economic development of the country. It also means identifying and going after sources of investment, trade, soft loans and joint ventures on the basis of marketable, positive development and opportunities being created in Namibia for both the local and private sectors. Foreign policy statement of the Republic of Namibia, March 1990.1 Part of the secret is that we respect confidences. We don't talk much. And we have been able to convince governments that the system works, and it is in their interest and ours that it continues to work. Peter Leyden, De Beers Senior Executive, 1981.2

Effect of debt on U.S. medical school graduatesʼ preferences for family medicine, general internal medicine, and general pediatrics

The authors assess the importance of educational debt in graduates' primary care specialty choices, and the variety of mechanisms through which debt may influence career decisions. Logistic regression models were used to identify significant predictors of the primary care specialty choices made by the 1991 and 1992 graduates of U.S. medical schools. These predictors were debt itself; other financial indicators; certain medical school characteristics; certain practice location plans; certain demographic factors; aspects of academic performance; and students' predisposition to a primary care specialty. Data for this study were gathered from a variety of sources at the Association of American Medical Colleges and from the Health Education Assistance Loans program. Both direct and indirect effects of debt were identified under specific conditions. The study revealed complex relationships between debt and the other predictors identified. For example, debt operated in relation to the levels of the graduates' expected incomes; debt from subsidized loan sources was significant for women who chose general internal medicine; debt was important in choices of family practice; and debt by itself was significant for those planning to practice in the West and who chose general internal medicine. Also, seemingly opposing effects of debt occurred. For example, in the family practice model used in this study, the threshold effect of debt was positive, while the linear effect of debt above the threshold was negative. Such vriations help explain the conflicting findings of some past research. These and other findings prompt the authors to state that when investigating the effects of debt, it is not fruitful to ask what the effect of the debt is on all three primary care fields as a group. It is more appropriate to ask several questions, such as: under what conditions does debt influence specialty plans? Among which groups of students does debt have an impact on specialty plans? Are all of the primary care specialties similarly affected by the issues surrounding debt? Does the effect of debt change over time? The authors conclude by indicating possible policy implications of their findings.

Forty years of litigation involving medical students and their education

An analysis of reported state and federal adjudication from 1950 through 1989 was undertaken to identify trends in litigation involving medical students and undergraduate medical education. Of the 110 cited judicial decisions during that time, 59 (54%) involved disputes over financing medical education; 43 (73%) were litigated since 1985. This dramatic increase arises primarily from challenges to National Health Service Corps obligations and from attempts to discharge or reorganize debt under the Bankruptcy Code. Medical school graduates enjoyed very little success in these cases. Analysis of court decisions points to a need for informed counseling for medical students, particularly as to the consequences of timing in default on service obligations and of incurring loans under the Health Education Assistance Loan (HEAL) program as opposed to other loan sources. The growing educational debt of today's medical students foreshadows continued litigation in this area.

The Long‐Term Mortgage Market Now: UK Banks, Foreign Banks and Assurance Companies

Reviews recent (from the mid 1970s) economic history, applying it to today′s mortgage market. Discusses loan sources – UK banks, overseas banks and life assurance companies. Concludes that the immediate future looks uncertain but longer‐term prospects look bright.

Interactions between Institutional and Informal Credit Agencies in Rural India

In an attempt to expand rural credit and displace the village moneylender, India created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s. This article examines how these measures affected the rural market. It begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders. A detailed comparison of three major surveys of the Indian rural credit market suggests that in various guises, the moneylender is still a major source of loans. The article also examines the (weak) evidence on intermediation between the formal and informal sectors. A formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector. The conclusions are drawn together in the form of five proposals for public policy.

Financial deregulation and UK housing finance: Government‐building society relations and the building societies act, 1986

Abstract UK building societies are the major source of loans for house purchase and major financial institutions in their own right. Financial deregulation has, however, had major implications for house purchase finance in the UK and for building societies in particular. In an increasingly competitive environment, there was mounting pressure to widen the scope of building society activities. This resulted in the Building Societies Act, 1986. This significantly expanded building society powers and introduced a new regulatory framework. This article gives an account of the background to the new legislation and its content, focusing in particular on government‐building society relations. These, it is argued, went beyond simple pressure group activity or lobbying by the societies’ trade association, the Building Societies Association. Government‐building society relations over this period are best seen as a form of informal, ‘corporatist interest intermediation’, a model which focuses attention on the recipro...

Terminating Building Societies in Quebec City, 1850–1864

In discussions of the history of real estate markets a key role clearly must be assigned to financial institutions, yet our knowledge of their various structures, particularly before the late nineteenth century, remains sketchy. One organization created to facilitate real estate purchases in the absence of other institutional sources of mortgage loans was the building society, either permanent or terminating. This article gathers together the information available about terminating building societies in mid-nineteenth century Quebec City. After an explanation of the societies' objectives and regulations, the article examines the difficulties that these societies faced as a result of general economic fluctuations and of the changing desires of members, who often wished to use the societies to place savings at interest rather than for home purchase.

The Revolutionary Process in Nicaragua

The articles in this issue constitute a particularly timely addition to the sparse literature on contemporary conditions in Nicaragua. They address crucial issues having to do with the nature, context, and direction of Nicaragua's revolutionary process. U.S. economic and military aggression against Nicaragua has escalated since the Reagan administration came into office. Over the last four years, the U.S. government has carried out an undeclared war against the revolutionary regime. The increasing military attacks on targets inside Nicaragua by the U.S.-backed counterrevolutionary forces based in neighboring Honduras and Costa Rica have resulted in a large number of casualties-close to 8000 civilians and soldiers. Included in this total have been many teachers, health workers, local officials, and government technicians involved in carrying out social reforms aimed at improving the living conditions of the general population. In addition, these attacks have destroyed or damaged a significant portion of the country's economic infrastructure of bridges, roads, ports, storage facilities for oil and water, power lines, and the like. Moreover, the Reagan administration has waged a relentless campaign of economic aggression aimed at destabilizing Nicaragua's economy through cutting it off from sources of essential imports, loans, and credits. In view of these conditions, it is remarkable that the revolutionary regime has undertaken the institutionalization of a system of representative

Does educational indebtedness affect physician specialty choice?

There has been much debate over the effect of educational indebtedness on the specialty choices of new physicians, especially in light of the perceived shortage of primary care physicians. This paper explores the theoretical foundations on which this debate is based. In addition, the paper estimates the effects of various types of debt on specialty choice. The results suggest that an increase in debt from subsidized loan sources (i.e., Guaranteed Student Loans, National Direct Student Loans, or Health Professions Student Loans) has mixed effects while an increase in debt from Health Education Assistance Loans reduces the likelihood of becoming a primary care physician. Though these effects are significant, they are very small in magnitude. Economic returns to certain specialties and personal background appear to play a more important role in specialty choice.

Service-conditional medical student aid programs: The experience of the states.

Medical student aid programs tied to a service commitment are in operation in 31 states. The programs provide various options for students to pay back the financial support given by the state, the most popular form being cancellation of the financial obligation to the the state if a service commitment is fulfilled. Although the statutory language and program literature claim a major objective of the programs to be the provision of manpower to underserved areas, lenient "buy-out" provisions and small awards relative to the total tuition have caused these programs to be used as sources of low-interest loans. Moreover, states do not provide subsidies to promote service in unattractive areas; thus, there is little reason for physician graduates to locate in low-income areas. State cooperation with the federal National Health Service Corps Scholarship Program, which does provide subsidies to physicians practicing in underserved areas, may provide the states a strategy for meeting their legislative objectives of providing physicians for the underserved.

Pledging Oil Palms: A Case Study on Obtaining Rural Credit in Nigeria

The practice of borrowing money has always existed. Rarely do individuals, groups, communities, or even governments, have enough money to execute their needed programs or carry out their most urgent and important obligations. Financial difficulties, therefore, can and often do lead people to borrow money. Although facilities and sources for borrowing vary between developed and developing countries, it is universally accepted that both the borrower's and the lender's interests must be protected in the transaction. In most developed countries, the main sources of loans are financial institutions. Borrowers negotiate directly with these institutions with regard to both rates of interest and loan repayment. In the developing countries, however, financial institutions are very limited in their ability to provide lending services, especially to the rural people. Consequently, most developing countries have created other methods of borrowing. These methods vary from one country to another. As Herskovits observed (1965: 225-6), “The institution of credit is widely spread in non-literate societies, accompanies all types of exchanges, and is found in cultures of all degrees of economic complexity.” One method developed over the years in the Cross River State of Nigeria and, in fact, in most parts of Nigeria, has been pledging. Pledging involves the institutional transfer of the use rights of a piece of property from one individual to another in return for a sum of money. The individual who advances the credit enjoys usage rights of the pledged property until he receives his money back. The practice of pledging oil palm trees is as old as the society itself and continues today in spite of the recently promulgated Land Decree (Nigerian Federal Ministry of Information, 1978).

Approaches for Assessing the Risk Involved in Lending To Developing Countries

The enormous increase in the external debt of the developing countries in recent years, and the prospect that this debt will continue to grow in coming years, have focussed attention on the risk involved in lending to those countries. An assessment of this risk important to the private commercial banks in the industrial countries, which have become a major source of loans to the developing countries, and which must decide how large an exposure they may safely accept in particular countries or regions. It is also important to the regulatory authorities in the industrial countries, which concerned with the soundness of the banking system under their jurisdiction and with the safety ofthe deposits entrusted to the banks. More generally, an assessment of this risk is important to the economic community at large, including both the industrial and the developing economies, as part of the background needed for an effective formulation of economic and financial policies, at a time when continued good health of the world economy might threatened, should difficulties in servicing developing countries' external debts cause a spread of insolvency among banks in the industrial countries.