Low Repayment Research Articles

Blue Economy Financing Solutions for the Fisheries and Aquaculture Sectors of Caribbean Island States

This study reviews various financing solutions available for fisheries and aquaculture development in Caribbean small island developing states (SIDS) and Barbados, Grenada, and St. Vincent and the Grenadines. Previously identified financing needs within the fisheries and aquaculture sectors have been matched with the most suitable financing mechanisms. However, the use of blue levies is recommended and applicable in almost every scenario, as they allow these sectors to drive their own development in financing research and conservation projects to their own benefit. The use of “blue tokens” with sufficiently low repayment coupons allows development projects to gather public support for fisheries, thereby increasing the likelihood of the project being successful through community buy-in. The possibility of natural capital being traded as public equities as “Natural Asset Companies” provides the opportunity for development projects to fund themselves. The review concludes that natural capital can be leveraged as the base through which public-private partnerships (PPPs) can facilitate optimal delivery of ecosystem services, benefit multiple stakeholders, and provide numerous development opportunities. An enabling environment for debt and lending with low-interest loan repayments is also applicable to almost every scenario, as it facilitates access to capital finance for infrastructure development and the acquisition of increasingly sustainable fishing equipment. Steps towards generating an enabling environment for financing fisheries and aquaculture in the Caribbean region are also discussed. The establishment of dedicated financing institutions, PPPs, and sufficient data reporting infrastructure for the fisheries and aquaculture industry are essential for driving development in these sectors. Likely, the largest limiting factor in financing Caribbean fisheries and aquaculture industries is a lack of awareness of the range of finance and financing mechanisms available to stakeholders, as well as an enabling environment for financing blue Economy sectors. This review is thus intended to aid financing institutions, Blue Economy developers, and specifically Caribbean fisheries and aquaculture stakeholders and Caribbean governments by raising awareness of the financing mechanisms available, encourage the incorporation of their use in the fisheries and aquaculture industries in the Caribbean, and encourage policymakers to create an enabling environment for financing development in these crucial sectors.

Klasifikasi Menggunakan Algoritma K-Nearest Neighbor pada Imbalance Class Data dengan SMOTE. (Studi Kasus: Nasabah Bank Perkreditan Rakyat “X”)

<p class="AbstractEnglish">Rural Banks (Bank Perkreditan Rakyat/BPR) provide financial services to micro-businesses and low repayment communities, especially in rural areas. The main activity of the bank is lending. Customer credit classification is expected to assist BPR in anticipating potential bad loans. K-Nearest Neighbor classify current and potential bad credit status based on customer data from BPR “X” in Central Java in October 2022. K-Nearest Neighbor is effective against a large amount of training data and works based on the nearest neighbor. There is an imbalance class data which causes the classification process to focus more on the majority class. Imbalance class data is handled using Synthetic Minority Oversampling Technique (SMOTE) as an oversampling approach. Classification with the addition of SMOTE can improve the evaluation of classification accuracy, especially G-mean. G-mean is the most comprehensive measurement in term of accuracy, sensitivity and specificity in evaluating classification performance on imbalance class data. The results of this research were able to increase g-mean to 58.55% and sensitivity to 45.46% by implementing SMOTE. Based on the classification results, it is concluded that K-Nearest Neighbor with SMOTE at k = 19 and a proportion of training data to test data of 70:30 is a more appropriate classification model to use for customer credit status.</p><p class="AbstractEnglish"> </p><p><strong>Keywords: </strong>Credit Status; K-Nearest Neighbor; Imbalance Class Data; SMOTE</p>

Contingent Contracts in Banking: Insurance or Risk Magnification?

AbstractWhat happens when banks compete with deposit and loan contracts contingent on macro‐economic shocks? The private sector insures the banking system efficiently against crises through such contracts when failing banks go bankrupt. When risks are large, banks may shift part of the risk to depositors who receive state‐contingent contracts. In contrast, when failing banks are rescued, new phenomena such as risk magnification emerge. Depositors receive noncontingent contracts, while loan contracts demand high repayment in good times and low repayment in bad times. Banks overinvest and generate large macro‐economic risks, even if the underlying productivity risk is small or zero.

Gendered investment differences among smallholder farmers: evidence from a microcredit programme in western kenya

The advent of microcredit programmes in sub-Saharan Africa provides opportunities for rural households to acquire agricultural inputs and consumer goods. This study analysed gender differences in investment behaviour and repayment performance using a unique dataset—the complete client database (21,386 clients) of a microcredit programme operating in Western Kenya. Products purchased via the microcredit programme include seeds, fertilisers, post-harvesting technologies (drying sheets, storage bags, and pesticides), chicken feed packages, and different solar panel products. A machine learning-based basket analysis identified combinations of products purchased by male and female clients. Our results showed that female farmers usually made smaller investments, had higher repayment rates, and purchased more post-harvesting technologies than male farmers. In addition, female farmers used their loans to purchase less expensive products, whereas male farmers usually purchased more fertiliser and expensive solar panel products. The basket analysis revealed that female farmers purchased multiple products simultaneously more often than male farmers did. Finally, households without mobile phones had low repayment capabilities. Collectively, our findings show that microcredit programmes serving smallholder farmers can capitalise on their business data to learn about their clients’ gendered investment preferences and repayment behaviour.

Repayment of National Higher Education Fund Corporation (PTPTN) Loans-Factor Influencing Graduates

In many countries, education loan is provided as a primary source and alternative financial assistance by their government in order to reduce the financial burden of students at various level throughout their studies. In Malaysia, National Higher Education Fund Corporation (PTPTN), that provides education loans for students has made national headlines in the past years for low repayment rates from its borrowers. Thus, the issue of low repayment rates by borrowers is undoubtedly subjected to research attention. This paper examines the factors influencing graduates repayment of National Higher Education Fund in Penang, Malaysia. Data for this research was collected via online structured questionnaires which were completed by 118 graduates from Penang who received their education loan from the National Higher Education Fund (PTPTN). The collected data were then quantitatively analyzed using multiple regressions. The analysis showed a negative relationship between the factors influencing graduates repayment of education loan which is media influence, borrowers’ attitude, affordability and incentives towards loan repayment.

When do more selfish politicians manipulate less, not more?

We model the political manipulation of deficits in a political budget cycle model. Assuming that a share of voters suffers from debt illusion the incumbent can increase her re-election chances by expanding government spending. However, the optimal manipulation may exceed the amount necessary to maximize re-election chances (over-manipulation) if the deficit is not very costly (low repayment obligation). Then, more selfish politicians (higher ego rents and, therefore, increased re-election motivation) reduce the over-manipulation. Conversely, “excessive” spending may wrongly be interpreted as opportunistic government manipulation. Theoretical results are supported empirically, with very robust evidence in a sample of 87 democracies.

Editorial for the Special Issue on Commercial Banking

The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, the bank is able to provide unique services in the production and exchange of information. Therefore, banks have comparative advantages in information production, transmission, and utilisation. In credit provision, it is possible for lenders to make Type I and Type II errors. These types of errors are associated with whether banks decide to lend money to borrowers with low repayment capacity or risk missing out on potentially profitable lending. However, the recent US subprime loan crisis and previous financial crises (such as the Mexican, Argentinian, Chilean and Asian financial crises) show it is possible that banks can make both good and bad lending decisions. Does this mean that banks have lost their comparative advantages in leveraging information asymmetry? This Special Issue includes contribution in empirical methods in banking such risk and bank performance, capital regulation, bank competition and foreign bank entry, bank regulation on bank performance, and capital adequacy and deposit insurance.

Analisis Strategi Bersaing Dalam Upaya Untuk Meningkatkan Jumlah Nasabah Produk Pembiayaan Warung Mikro

Abstract Warung Microfinance is Bank financing to individual customers or business entities engaged in the MSME sector to finance their business needs through working capital financing or investment financing. This product is not only owned by banks, but other Islamic banks also own it. To face competition between banks, each bank must have a different competitive strategy. This description is a type of qualitative research that aims to find out the procedures for financing micro stalls, the competitive strategies used and the obstacles encountered in implementing the competitive strategy. Data analysis using descriptive methods. To obtain valid data, the author uses several data collection techniques, namely observation, interviews and documentation. The results of this study state that the procedure for financing a micro shop at the Bank is very easy. Customers come to the bank office with the requirements for financing a micro shop and then the paperwork will be taken care of by the administration. If it is complete and meets the requirements, it will be continued by signing the agreed contract. The competitive strategy used by the Bank is to provide a low mark up rate, more varied products and a low repayment rate. Constraints faced in the implementation of this competitive strategy are disbursement that is not timely (disbursement of funds stretched), other banks offer lower prices / mark-ups and lack of employees.

Determinants of loan repayment by beneficiary farmers under the integrated farmers scheme in Akwa Ibom State of Nigeria

This study examined determinants of loan repayment by beneficiary farmers under the Integrated Farmers Scheme (IFS) in AkwaIbom State of Nigeria. Most government and other institutional funding effort to agricultural sector have been fraught with difficulties especially defaulting on loan contract. The specific objectives are: assess the factors that affect loan repayment among the beneficiaries, examine the level of loan repayment performance and to ascertain the factors that influence loan repayment of the beneficiaries in the study area.Primary data used for the study were collected with the aid of a well-structured questionnaire. Simple random sampling was used to select the eighty four respondents. Data collected were analyzed using mean, percentages and Ordinary Least Square. Result shows that 89.23% of beneficiaries indulged in diversion of loan to family uses. Loan performance indices estimated shows that only 25.94% of borrowed amount was repaid as at when due. This situation indicated a low repayment performance. Empirical result shows that loan from other sources, farming experience, amount of money borrowed and total income were the significant factors that influenced loan repayment. It was concluded that low repayment limited effective loan administration in the study area. It was recommended that regular monitoring by lender should be heightened to ensure prompt repayment. Farmers should be encouraged by the funding agency to repay loan promptly, this could be through education, persuasion and at times necessary threatening with Police arrest and exclusion from further funding.Keywords: Loan Repayment, Farmer Beneficiary, Integrated Farmers Scheme, Determinants

Investigating the Challenges Faced by Microfinance Institutions in Ghana: Evidence from Takoradi

Micro Finance Institutions (MFIs) contribute immensely to the economy of every nation. Particularly, within the informal sector, MFIs constitute the pivot around which many financially disadvantaged individuals rely on in terms of access to finance for their businesses. MFIs play a tremendous role in the poverty reduction and employment creation agenda of many nations including Ghana. Notwithstanding the immense role MFIs play in the economies of nations, there is a wide recognition of the fact that the institutions can perform better if they are able to overcome the challenges they face in their operations. However, in order for MFIs to effectively tackle the challenges they encounter, it is important for them to first identify and appreciate these challenges and the threats they pose to the effectiveness of their operations. Within this context, this study sought to explore the challenges MFIs in Ghana face, with particular emphasis on those operating in Takoradi. The study was quantitative, with descriptive survey as the design. Managers and employees of MFIs located in the city licensed by the Bank of Ghana were involved in the study. Simple random sampling method was used to select 114 respondents for the study and questionnaire was relied upon for data collection. The researchers used frequencies, percentages, an independent samples t-test and ANOVA as tools for data analysis. The study observed that increased competition in the industry, low repayment rates, higher cost of information technology, low level knowledge of operators, inadequate and expensive infrastructure base, high capital requirements, unfavourable regulation and supervision, inadequate employee incentives, and erosion of public confidence in MFIs were ranked as major challenges in the industry. A significant difference existed in the perception of male and female respondents on the challenges MFIs in the city faced. However, there was no statistically significant difference in educational qualifications of respondents and their views on the challenges MFIs in Takoradi faced. It is recommended that MFIs in the city should invest in staff development for all levels, from senior level to junior level. Also, Managements of MFIs should put in place adequate measures to educate their clients on the need to pay their loans and also institute appropriate sanctions to deal with loan defaulters. This will also require MFI to ensure credit worthiness of clients before granting them loans. Again, the Managements of MFIs should come out with appropriate measures to incentivize their employees so as to avoid possible cases of poaching. Key Words: Challenges, Development, Financial Institutions, Microfinance, Financial System, Poverty DOI : 10.7176/RHSS/9-10-13 Publication date :May 31 st 2019

Interest-only-mortgages and housing market fluctuations in Denmark

Low repayment rates on mortgages have probably contributed to increased macroeconomic imbalances for several countries in recent years. The objective of this paper is to analyze how the introduction of interest-only-mortgages in 2003 affected the Danish housing market. Using quarterly data between 2001 and 2013, we analyze the long- and short-run relationships between mortgage repayments and three dependent variables: real house prices; the number of property sales; and mortgage debts in relation to disposable income. We find that including mortgage repayments in nominal housing payments improves the econometric fit when predicting house prices and mortgages in relation to disposable incomes in both the long run and the short run, but not when modeling sales. Also, the conventional user cost variable either turn out insignificant or with the “wrong” (i.e. positive) sign, while nominal housing payment, including mortgage repayments, are significantly negative. However, some regression results are sensitive to specification and there are some indications of reversed causality issues. We therefore perform complementary event studies. The results of the event studies suggest that real house prices and the mortgage debt ratio increased considerably faster than otherwise expected between the introduction of interest-only-mortgages and the start of the financial crisis in 2007. Results are similar when using the results from our long- and short-run regressions to simulate the effects of introducing interest-only-mortgages. Our most conservative estimates suggest that the introduction of interest-only-mortgages raised real house prices and the mortgage debt ratio by about twenty and ten percent between 2003 and 2013, respectively. Our results raise questions of whether households base their decisions on real or nominal variables, actual costs, or cash flows, and if interest-only-mortgages have promoted housing affordability or have rather contributed to increased house prices and household debts.

Comparative Analysis of Applications and Disbursements of Loans to Beneficiaries by Bank of Agriculture in Anambra State, Nigeria

The study investigated the comparative analysis of loan applications and disbursements to large and small scale farmer beneficiaries of Bank of Agriculture from 2010-2016 in Anambra State, Nigeria. The specific objectives were to ascertain the socio-economic characteristics of the large and small scale farmer beneficiaries, to estimate the total amounts of applications and disbursements to large and small farmer beneficiaries of BOA loans and constraints militating against loan administration by BOA staff. A multistage sampling procedure involving purposive and random sampling methods were used to select 256 respondents for the study. Data were collected from both primary and secondary sources. Primary data were collected using two sets of questionnaire; one for the farmers and the other for the bank officials while secondary data were sourced from loan transaction records in the headquarters and branch offices of BOA in the State. Collected data were analyzed using descriptive statistics technique. Findings indicated that the large scale farmers were more advanced in age, more educated, had higher years of farming experience, number of persons in the household and number of males among them than the small scale farmers, who, however, were better at repayment. Majority (60.00%) of applications and 60.33% of disbursements to the large scale farmers were for poultry and fish production while the small scale farmers’ most (53.28%) applications and disbursements (53.26%) were for the production of crops. The most serious constraints to loan administration by the bank staff were low repayment rate, inadequate fund for lending, insufficient staff for credit administration, inadequate collateral provision and loan diversion by beneficiaries. The provision of more funds, more skilled staff, and adequate logistics to the BOA by government, timely disbursed of approved amount, minimization of bureaucratic procedure involved in the administration of the facilities by the BOA and formation of more cooperative groups by the beneficiaries were recommended.

Contingent Contracts in Banking: Insurance or Risk Magnification?

We examine whether the economy can be insured against banking crises with deposit and loan contracts contingent on macroeconomic shocks. We study banking competition and show that the private sector insures the banking system through such contracts, and banking crises are avoided, provided that failed banks are not bailed out. When risks are large, banks may shift part of them to depositors. In contrast, when banks are bailed out by the next generation, depositors receive non-contingent contracts with high interest rates, while entrepreneurs obtain loan contracts that demand high repayment in good times and low repayment in bad times. As a result, the present generation overinvests, and banks generate large macroeconomic risks for future generations, even if the underlying productivity risk is small or zero. We conclude that a joint policy package of orderly default procedures and contingent contracts is a promising way to reduce the threat of a fragile banking system.

The cost of abatement options to reduce carbon emissions from Australian international flights

ABSTRACTIn 2012, a total of 13.1 million tonnes of carbon dioxide were emitted by 14 airlines while transporting 72 per cent of international passengers into and out of Australia in 2012. With passenger and cargo traffic growing at between five to six per cent annually from 2013 to 2033, acquiring more fuel efficient aircraft to both renew the existing fleet and to service growth has the greatest potential in reducing emissions over the next 20 years. Our analysis shows that implementing carbon dioxide emissions abatement options such as installing light weight seats, iPad electronic flight bags, winglets, washing aircraft engines and reducing the number of engines used during taxiing, all offer net financial savings when considered over 20 years. Acquiring new fuel efficient aircraft has the biggest impact on emissions reduction. Low interest loans and longer loan repayment periods may incentivise airlines to acquire more fuel efficient aircraft to service traffic growth but other complimentary incentives and penalties are required to influence airlines to replace their current fleet with more fuel efficient aircraft.

MITIGATING LOAN REPAYMENT TROUBLES DURING MICROFINANCE EXPANSION: EVIDENCE FROM A LARGE PANEL

(ProQuest: ... denotes formulae omitted.)1.INTRODUCTIONOne of the core objectives of microfinance institutions (MFIs) is the provision of banking/financial services to non-traditional customers known as poor and low-income households or businesses. A significant challenge facing these institutions is the struggle for financial self-sufficiency. This means controlling most of the risks in the loan portfolio through adequate loan collection and timely loan repayments. Doing so, provides for further extension of funds to other borrowers, resulting in further outreach and development (Crabb and Keller, 2006).Examining this challenge in the presence of uncontrolled is of importance, since fast microfinance could pose substantial strain on MFIs' mission, making it harder for them to operate sustainably in such an unconventional market structure. In addition, the 2004-2008 surge in microfinance provides a great opportunity to test this hypothesis.There is a paucity of empirical work on the effects of the unprecedented rapid microfinance expansion that occurred between 2004 and 2008. Practitioners have speculated that this phase in microfinance activities has led to increased loan delinquency. According to Gonzalez (2009), the increase in the number of borrowers during the expansion averaged 21 percent per year while loan portfolio jumped by a staggering 34 percent per year on average.Chen et al. (2010) and Stephens (2009) examine some of the emerging economies qualified as high growth markets and show that in 2008, these markets1 experienced devastating loan delinquency rates. These studies feed into the narrative that aggressive in microfinance lending may pose higher credit risk to MFIs as loan recovery efforts become more challenging. Chen et al. (2010) identified key contributing factors to poor loan repayment rates among which microfinance is mentioned. However, they present no empirical evidence.In this paper, we use a new and improved proprietary comprehensive dataset that includes a large cross-section of MFIs to estimate the effect of rapid microfinance expansion on loan delinquency. The use of such a comprehensive data mitigates that kind of measurement error that plague many microfinance studies (missing data) and allows us to estimate linear panel models. Given that the effects of microfinance expansion may not be visible during the boom years (2004-2008), we extend our dataset from 2003 to 20132 to include post-boom years. For proper identification of the effect of microfinance expansion on loan delinquency, we control for aspects of microfinance (micro) and beyond-microfinance (macro) design.2.DETERMINANTS OF LOAN REPAYMENTLoan repayment is the most revealing of the five3 performance areas of a MFI (Rosenberg, 2009). So, the ability to collect loans is critical to the success of MFIs. We use the loan loss rate to proxy loan repayment.... (1)The loss loan rate measures how well a MFI collects its loans and our presumption is that higher values of loan loss rate are associated with lower repayment rates.To measure the impact of microfinance on loan delinquency, it is important to control for factors that may explain changes in loan repayment. The choice of control variables is motivated by the literature. We hypothesize that loan repayment is influenced by the of lending,4 the percentage of female borrowers,5 other (micro) institutional factors6 such the personnel allocation ratio (percent of staff devoted to credit control), the quality of prudential regulation, the quality of technical assistance, operational self-sufficiency, financial intermediation and credit risk (portfolio at risk more than 30 days) and macroeconomic variables7 (GNI per capita rate and inflation) that may affect the ability of the MFI to recover loans.Following the Microfinance Information Exchange (MIX) Market definition, operational self-sufficiency is calculated as follows:. …

Borrower characteristics and mortgage rate choice in Sweden

Purpose– The purpose of this paper is to investigate driving forces behind mortgage rate choice among homeowners in a market of no mortgage rate spread. The study reported on was conducted in Sweden, a country relatively spared both from effects of the subprime crisis and the on-going Euro-crisis. A number of potentially influential factors, such as respondents’ risk aversion, financial vulnerability, experience, expectations as well as the impact of media and bank advisors are examined and a number of demographic factors controlled for.Design/methodology/approach– The study reported on is based on data from a national randomized survey conducted in Sweden in 2012. An empirical analysis is carried out on a sample of 474 households with mortgages. A logistic regression is performed to test a model based on hypothesized factors.Findings– The study shows that consumers choosing fixed rate mortgages (FRMs) have high LTV and high risk aversion and perceive their choice as having been influenced by bank advisors. This is in line with earlier findings. Lower levels of – or no – FRMs (more adjustable rate mortgages) seems to be attractive for the wealthier with higher education and previous experience of home owning. Other factor negatively affecting the choice of FRMs are: being younger; being influenced by media; and perceiving oneself as financially vulnerable.Research limitations/implications– To summarize, this paper contributes to research in two major ways: first, the Swedish case is modeled against a review of international research on mortgage rate choice. Second, a number of consumer-related factors are investigated, and their relative contribution as drivers of a choice of FRMs are tested. This gives input to more theoretical research conceptualizing a model for the understanding of how consumer mortgage rate choices are made.Practical implications– The results should serve as an alarm bell for the industry, as the consumers described – the youngest mortgage holders, the financially vulnerable with low repayment capacity and those easily influenced by reports in media – are a potential threat to stable development of long term customer relations and mortgage portfolios.Social implications– The results gives reason for policy makers to address the question and reasons to call for more studies of the preferences and choices of the younger consumers.Originality/value– This study represents an investigation into some factors not often studied in relation to mortgage rate choice. It also highlights the Swedish case and puts it in an international context.

Determinants of Group Lending in the Credit Union Industry in Ghana

Using binomial logistic analysis, the authors analyze data on 222 credit unions (CUs) drawn from the CU industry in Ghana in the 2008 financial year and find that CUs that have larger size of management, lower repayment performance, no delinquent loans over 30 days, better liquidity positions, and have been in the CU business for a long time, are more likely to adopt group lending. The findings of this study also show that the gender structure of a CU does not influence its group lending decision. The authors argue that CUs adopt group lending to improve their loan repayment performance, consistent with the literature.

A multi-objective approach for the prediction of loan defaults

Credit institutions are seldom faced with problems dealing with single objectives. Often, decisions involving optimizing two or more competing goals simultaneously need to be made, and conventional optimization routines/models are incapable of handling the problems. This study applies the Fuzzy Simplex Generic Algorithm (a multi-objective optimization algorithm) in generating decision rules for predicting loan default in a typical credit institution. Empirical results show that the best indicators of default status are observed when repayment capacity and owners equity are low and the working capital is either low or high. Also, the two worst rule indicators are low repayment capacity, high owners’ equity and medium working capital or medium repayment capacity, low owners’ equity and high working capital.

Credit delivery and sustainability of micro‐credit schemes in Nigeria

PurposeThe purpose of this paper is to examine the effects of access to credit through micro‐credit institutions on entrepreneurial performance and assesses the loan performance of public credit schemes in Nigeria in order to determine the sustainability of such schemes.Design/methodology/approachThe study employed qualitative approach and exploratory perspective, using primary and secondary data obtained at beneficiary and institutional levels.FindingsThe loan repayment rates were generally low for many of the schemes, and this confirms the problems of public sector lending, with implications for the sustainability of the schemes. Many reasons were given for the low repayment rates, among which were poor credit culture of the schemes managed by public sector and the attitudinal nature of Nigerians towards public funds.Practical implicationsThere is a need for policy makers, researchers and entrepreneurs to improve on the designing of micro‐credit schemes in order to be sustainable.Originality/valueThis paper makes a first step towards comparing the performance of public and private micro‐credit schemes in Nigeria.

Banking with Contingent Contracts, Macroeconomic Risks, and Banking Crises

We examine banking competition when deposit or loan contracts contingent on macroeconomic shocks become feasible. We show that the risk allocation is efficient, provided that banks are not bailed out. In this case, banks may shift part of the risk to depositors. The private sector insures the banking sector and banking crises are avoided. In contrast, when banks are bailed out, depositors receive non-contingent contracts with high interest rates, while entrepreneurs obtain loan contracts that demand high repayment in good times and low repayment in bad times. As a result, the present generation overinvests, and banks create large macroeconomic risks for future generations, even if the underlying risk is small or zero.