Loan Rates Research Articles

Probability causal inference of interest rate fluctuations: Evidence from private credit in emerging markets

Preventing risks in the private credit market is an important component of maintaining financial stability, especially in emerging markets. As loan amounts serve as both the cause and the effect of credit interest rates, through the weighted path convergence design of conditional probability and joint probability, this study establishes a probabilistic causal inference framework of loan amounts and interest rates to explore the mechanism of interest rate fluctuations in China's private credit market, market behaviour of the allocation of private loan amount, and the design of policies. The analysis provides several results. (1) The fluctuation of private credit interest rate occurred during the outbreak of the epidemic (2019Q1-2020Q1), the credit interest rate was mainly controlled by the loan amount, and the interest rate fluctuation mainly originated from private credit market behaviour. In the early stage of the post COVID-19 economic recovery (2020Q3-2021Q3), the credit interest rate is mainly controlled by non-loan amount factors, and the interest rate fluctuations occurred mainly because of the non-market behaviour of private credit, which is related to government policy support and the increase in low-interest loans from financial institutions. (2) As a result of market behaviour, for the 19.54 %–22.50 % of high interest rates on borrowing, the probability of high interest rates due to the loan amount increased by 40.48 %. (3) By policy design, reallocating the risky loan amount, the interest rate can be reduced by up to 7.36 % on a highlight-interest rate day. The reallocation of loan amounts for different security methods has varying effects on interest rates reductions, and there may even be ineffective allocations. The findings provide decision support for financial regulators in emerging markets to stabilise interest rate volatility in private credit markets.

The Effects of Credit Score Migration on Subprime Auto Loan and Credit Card Delinquencies

In the early stages of the pandemic, income support and forbearance programs led consumer loan delinquency rates to fall to near-record lows for borrowers across the credit score distribution. Since the second half of 2021, however, delinquency rates have risen, and by 2023:Q3, overall rates for auto and credit card loans had risen above their pre-pandemic levels.

The financial stability of the banking sector: An empirical investigation using the CAMEL rating approach

The study compares the CAMEL ratings of five central Indian commercial banks over 12 years (2011–2022). The findings indicate that most banks received a rating of 1, with an average capital adequacy ratio (CAR) of 15.18 percent. Maintaining low non-performing loan (NPL) rates is a priority for Indian banks, as reflected in the average of 1.98 percent with a grade of 2. The research concludes that these banks are well-managed, showcasing an average operational efficiency/income ratio of 40 percent (rated 3), signifying good managerial efficiency. This suggests banks can meet short-term customer commitments and withdrawals adequately. Notably, State Bank of India (SBI) and Punjab National Bank (PNB) received a grade of 2, while Axis Bank, Industrial Credit and Investment Corporation of India (ICICI) Bank, and Housing Development Finance Corporation (HDFC) Bank scored a rating of 1. The study indicates that private sector banks outperform their public sector counterparts across all CAMEL model parameters, showcasing more robust performance metrics. The paper advises Indian banks to invest in the long run, watch their risks, and aim for steady growth and profit. The study emphasises the importance of capital, assets, and management for a healthy banking system, suggesting improvements in earnings and liquidity management for overall stability and growth.

Unleashing Ghana’s Banking Sector Might: A Comprehensive Analysis of Contributions, Competitiveness, Challenges and Policy Recommendations

This study examines the contributions, competitiveness, and difficulties of Ghana’s banking industry through a thorough analysis of the literature. The sector, which contributes to Ghana’s GDP and supports SMEs and government projects, is beset by challenges such as high non-performing loan rates and expensive borrowing. However, secondary data from sources like the Bank of Ghana and scholarly journals show that the sector has a significant impact on GDP growth, employment creation, and financial inclusion. Through fintech and digital banking, it contributes to financial inclusion as well, despite ongoing obstacles like the digital divide and expensive service fees. The analysis points out important patterns and weaknesses and makes recommendations for strengthening financial inclusion, regulatory frameworks, and credit risk management. It recommends boosting technological innovation, cutting compliance costs, and improving risk management in order to increase competitiveness. Subsequent investigations ought to tackle the dynamically changing banking industry in order to bolster Ghana’s economic expansion and stability.

Kredyty hipoteczne o stałej oraz okresowo stałej stopie procentowej – ocena dotychczasowej polityki regulacyjnej oraz rekomendacje dla niej

Purpose – The purpose of this paper is to identify the channels of impact of the growing volume of fixed‑rate or periodically fixed‑rate mortgages on stability of the banking sector, which may be threatened by the materialisation of credit and legal risks associated with the mortgage loan portfolio and to formulate recommendations for regulatory policy for banks offering mortgages. Research method – The method used was that of analysing statistical data and inferring from it, a critical analysis of the literature on the subject and a positive economic analysis of the law. Results – Fixed‑rate and periodically fixed‑rate mortgage lending by banks does not necessarily contribute to stability of the banking sector, and consequently also financial stability. This is because, on the one hand, in an environment of rising interest rates, a portfolio of fixed‑rate mortgages generates lower credit risk, while, on the other hand, prepayments made in an environment of falling interest rates have a negative impact on banks’ performance. On the top of that the offer of periodically fixed‑rate loans raises the risk of a spike in borrowers’ instalments. In relation with that regulatory policy should consider the current and expected level of interest rates, taking into account the type of fixed rate, the total cost of the mortgage over its lifetime and the risk of payment spikes that a borrower using a periodically fixed rate loan may experience. In addition, the regulatory authorities can be expected to harmonise the reporting obligations of loan companies so that banks’ assessment of creditworthiness includes an analysis of all borrowers’ obligations and behavioural aspects arising from an analysis of the track record of relationships with loan firms. Another challenge is the need to harmonise bank standards on the sources of income taken into account in the creditworthiness assessment. It is up to supervisory regulation to determine whether cost‑reducing, more predictable fixed‑rate mortgages will contribute to financial stability. Originality / value / implications / recommendations – The paper provides recommendations for regulatory policy on the offering of fixed or periodically fixed‑rate mortgages by banks, taking into account macroeconomic and idiosyncratic factors. It is the first study aimed at identifying future risks of inadequacy between the fixed‑rate‑based structure of new mortgage lending and expectations of inflation and changes in market interest rates.

Navigating NPLs: Financial Health Analysis of BPR Bank Gresik

The Regional Public Bank (BPR) Bank Gresik plays a crucial role in supporting small businesses in rural communities and economically vulnerable groups in urban areas through the provision of credit loans. Credit, as the primary productive asset, serves as the main source of income for the bank. However, credit disbursement also entails credit risk, which can lead to the occurrence of non-performing loans. This research aims to identify the handling of non-performing loans and its impact on profit growth at Bank Gresik. The research methodology employed is descriptive with a qualitative approach. Data analysis is conducted using the Miles and Huberman model, involving data collection, data reduction, data presentation, and drawing conclusions. The results of the research indicate that the causes of non-performing loans originate from both internal and external factors of the bank. The handling of non-performing loans involves various steps, including telephone warnings, direct home collections, warning letters, summon letters, restructuring, posting banners on collateral, cession, simple lawsuits, insurance disbursement, and the takeover of debtor collateral. Despite the increase in the non-performing loan rate, the bank's profit continues to grow due to the influence of interest rates..

Heterogeneous Impact of Monetary Policy on China's Real Estate Market

This paper examines whether the broad money supply (M2) and the interest rate as two monetary policy tools will have different effects on housing prices. A sample of 10 listed real estate companies was analysed using panel vector autoregression (PVAR) models, using data from 2007 to 2020. The empirical results show that there is a correlation between housing prices and M2 in the short term, which is even more obvious in the medium term. Overall, M2 has a positive impact on house prices. On the other hand, the three-year loan rate has no significant impact on housing prices in the short term, but has a negative impact on housing prices in the long term. After the pulse response analysis, the money supply has a more significant impact than the interest rate on the real estate price, and has a better effect in controlling the housing price. The research results contribute to the scientific formulation of monetary policy and the reasonable control of the market.

On the effectiveness of the interest rate channel within inflation targeting in Ukraine: a VAR approach

Assessing the effectiveness of the inflation targeting framework via the interest rate channel remains crucial in the current monetary policy debate. For Ukraine, the relevance of this discussion is enhanced by the adoption by the National Bank of a rigid inflation targeting policy since 2016, as well as by the challenges of price stability during war. The aim of the study is to identify how the discount rate affects the money market rates and how this affects inflation in Ukraine. Employing a VAR model on monthly data spanning 2016 – Q1 2022, the analysis demonstrates weak empirical evidence for the interest rate channel effectiveness. The impulse response indicates that the discount rate’s initial effect does not provide long-term inflation dynamics control. Variance decomposition analysis highlights the minimal influence of the NBU’s discount rate, primarily evident in the refinancing rate, followed by its impact on the rate of term deposits made by individuals, followed by the inflation, followed by the rate of new loans granted to residents, and finally the rate of government bond yields. Addressing the limitations of a rigid inflation targeting approach, the study recommends adopting a balanced approach, considering both price stability supported by exchange rate control measures and fostering economic growth. Additionally, a viable strategy for deepening the financial sector should be developed.

Manufacturer’s Green Financing and CER Decisions under the Carbon Tax Policy and Capital Constraints

This study constructs a two-echelon low-carbon supply chain consisting of a single manufacturer and a retailer. The manufacturer’s initial capital is zero. The study analyzes three financing modes of the manufacturer by using the Stackelberg game model: external financing (the EF mode), internal financing (the IF mode), and trade credit financing (the TC mode). We found that the IF mode is superior to the EF mode while inferior to the TC mode regarding carbon emission reduction (CER), market demand, and the manufacturer’s profit. Additionally, the IF mode is superior to the EF mode regarding the retailer and supply chain’s profits and special to the TC mode only when the loan and deposit interest rate meet the specific conditions. The best financing mode for the manufacturer is the TC mode, but he needs to give some compensation to the retailer in order to make the retailer cooperate with him. The impact of carbon tax rate changes on the equilibrium solutions in the three financing modes is not only related to the change range of the carbon tax rate itself but also closely related to the initial carbon emissions. A high carbon tax rate can help stimulate the cleaner manufacturer to reduce carbon emissions, but a moderate carbon tax rate is more applicable to the polluting manufacturer. A numerical example is given to demonstrate some of the conclusions. Finally, the study provides managerial insights based on the analytical results.

Analysis of Coconut Production Trends under Three Policy Phases in Nigeria

ABSTRACT: Coconut is an important crop with numerous economic uses. However, it is not clear how coconut production has performed overtime considering policy inconsistencies within the Nigerian agricultural space. This study therefore measures trends in area, yield and production from a policy standpoint. The study measures growth rates, patterns of growth, sources of production growth and instability. The policy focus is centered on Structural Adjustment Programme (SAP). Data used for the study covers 1961 – 2017, broken into three sub-periods. The findings reveal structural weaknesses arising from slow adoption of new technology, occasioned by inadequate human and financial capital, a disjointed value chain system operating within a weak enabling environment and reliance on inherited land which reduces overtime thereby limiting expansion options for farmers; resulting in patterns of growth that show stagnation and deceleration in the sub-periods. To this end, in a bid to reverse this trend, the study recommends the need for a national coconut policy aimed at improving access to land, new technology, training, farm settlements and access to single digit loan rates that actively target youths in the coconut value chain, this initiative should accelerate the growth performance of coconut considering the immense benefit coconut offers.
 Keywords: Coconut; Decomposition; Growth rate; Growth pattern; Instability

Кредитный портфель российского банковского сектора в условиях экономической неопределенности

The article presents the results of the study of the impact of anti-Russian sanctions and uncertainty factors of the economic system on the volume of the loan portfolio and overdue debt, the growth rate of bank assets and loans, the cost of credit risk. A comparative analysis of the growth rates of the loan portfolio of the Russian banking sector for the first half of 2020, 2021 and 2022 was carried out. The. economic effect of the anti-Russian sanctions and structural changes in the economy on the dynamics of problem loans and financial results of the banking sector has been revealed. The growth rate of the loan portfolio is given depending on the form of lending.
 The main factors of credit risk occurrence and methods of its management are determined. As a result of the study, conclusions were formed about the further restoration of the Russian banking system and the prospects for the development of the credit market.

Do loan interest rate margins and loan fees move in the same direction and are they jointly determined?

A standard UK debt contract has two price components, the interest rate margin which is paid ex post and the up-front fee which is paid ex ante. The interest rate margin reflects risk, whilst the up-front fee is a mechanism for banks to price contract options and to screen borrowers, thus we cannot treat the fee as exogenous in interest rate margins as interest rate margins and fees may be jointly determined. Our empirical evidence shows that the two are indeed jointly determined, but that interest rate margins have a stronger (positive) effect on loan fees than vice-versa.

Внешнеэкономические связи и приграничное сотрудничество приграничных регионов Дальневосточного федерального округа как фактор обеспечения их динамичного развития

The article analyzes common approaches to solving the problem of developing the Far East by expanding promising foreign economic relations. The authors analyzed the regulatory framework and strategic planning documents on the development of the Far East region, highlighted key projects aimed at expanding foreign economic cooperation of the boundary regions. The development of the West-East international transport corri-dor is highlighted as key strategies; increasing the carrying capacity of the Baikal-Amur and Trans-Siberian railways, reorienting gas exports to the Asia-Pacific countries. Preferential regimes, reduction of the tax burden, simplification of bureaucratic procedures, reduction of the loan rate for small businesses, and development of free trade zones are effective mechanisms for developing investment attractiveness for foreign investors.

EQUIPMENT PRODUCTION STIMULATION MECHANISMS AS A KEY FACTOR OF THE STATE INDUSTRIAL POLICY IMPLEMENTATION

Equipment production stimulation mechanisms in Russia are investigated in the article, main directions of the state support in described area are highlighted. Its role is in the acquisition of domestic industrial equipment by interprises is emphasized as one of the effective measures to stimulate the development of the machine tool industry. It is justified that stimulation of the production of domestic industrial equipment by the state is a key vector of the import substitution program implementation, acts as the most pressing task for the industrial sector of the Russian economy at the present time. The problems that need to be solved in the area of equipment production stimulation mechanisms expending in Russia are highlighted, first of all: increasing the government funding for the production of equipment and components; determination of the status of foreign factories that have suspended their operations since 2022; solving the issue of personnel shortage at the enterprises of the machine tool industry. There is shown the necessity to expand such measures as: inclusion of the largest enterprises of the Russian machine tool industry in the list of systemically important companies with their subsequent enhanced financial support from the government; expansion of public-private partnership projects in the production of equipment and components; development of the technology parks and the industrial clusters; reduction of loan rates for the industrial enterprises; restoration of the system of vocational schools and increasing of the engineering specialties prestige; support of the technology marketing companies; creation of the specialized research and development centers.

The Impact of Benchmark Interest Rate towards Loan for the Housing Price A Case in Beijing and Shanghai from 2011 to 2015

The housing market in China has been booming for two recent decades, and housing issues gradually become one of the most important concerns of the residents in China as the housing price was rising dramatically. This paper would analyze the influences between the housing price and the benchmark interest rate in two major first-tier cities of China, Beijing, and Shanghai from 2011 to 2015 before the interest rate reform in China was completed, by conducting data analysis in the regression model. It is found that the benchmark interest rate for loans has an important role in influencing housing prices. Finally, this paper would help make a clear and better understanding of the mechanism of the Chinese benchmark interest rate for loans, and how Chinese governments used it to sort out residential accommodation issues by comparing it to the recent Benchmark interest rate (LPR).

The Drivers of Foreign Direct Investment in Nigeria

The study seeks to explore and present the macroeconomic factors that drive Foreign Direct Investments (FDI) in Nigera. It employed least square methods with model diagnostic tests and Granger causality processes on 1986–2020 Nigerian yearly data. The results show that interest rate, currency rate, and level of economic activity (represented by growth in real GDP) influence the flow of FDI into Nigeria. FDI is neither driven by inflation nor by market openness. The policy implications are that when considering policies aimed at attracting foreign direct investors to Nigeria, government and monetary authorities should give priority to such factors as interest rates, exchange rates, and the growth rate of the economy. It is suggested that reduced loan rates and slight Naira depreciation should be encouraged and promoted.

Time Series and Cyclical Analysis on Chinese GDP Growth in 2003-2022

This paper analyzes the trend of China's GDP from 2003 to 2022 using time series analysis, detrending and business cycle method. It highlights the importance of government investment in infrastructure and human capital to enhance efficiency in the Chinese economy. The paper finds that consumption, investment, and government consumption are highly positively correlated with GDP, suggesting that the government can stimulate the economy by increasing mass consumption, business investment, and government purchases. However, the value of net exports, which depends on the simultaneous changes of export value and import value, has great uncertainty and makes it difficult for the government to stimulate the economy through changes in net exports. Furthermore, the paper suggests that the priority in stimulating the economy should be given to increasing government consumption, followed by consumption and investment. The paper proposes several stimulus measures, including increasing infrastructure construction, issuing consumer vouchers, and reducing interest rates for business loans. These measures aim to boost government consumption, stimulate consumption, and encourage business investment, ultimately contributing to economic growth and development.

Legal provision of state financial support to the agricultural sector in the war and postwar periods

The article is devoted to the study of the current state of legal support of the state financial support of the domestic agricultural sector, the formulation of vectors for the improvement of the relevant legislation in the war and post-war periods, the development of proposals for the proper legal support of the outlined sphere.
 The analysis of normative acts regulating relations in the sphere of state support of the agricultural sector in the conditions of martial law showed their significant renewal. In particular, in terms of state credit support, the support of agricultural producers has been recognized as a priority area and a number of preferences have been preserved specifically for these subjects. A similar approach is applied to the financial support of economic entities of the agro-industrial complex through the compensation of leasing payments. The abolition of the zero compensatory rate for loans and zero compensatory remuneration for leasing is positioned by the authors of the article as a negative factor that makes it difficult for agribusiness subjects to realize the right to state financial support. The ineffectiveness of state support to the agricultural sector in the form of budget subsidies has been proven. This is a confirmation of the difficult situation in the economy of Ukraine, the reduction of budget funding in this direction and an argument in favor of finding alternative, less burdensome for the state, ways of support. The effectiveness of the activation of indirect and indirect support to the agricultural sector, through the creation of conditions for the better functioning of agribusiness (preferential taxation, customs benefits), involvement of the functions of international institutions, is substantiated.
 Attention is focused on the need to consolidate at the legislative level already introduced at the level of by-laws this type of state support for the agricultural sector, such as grant support, with further development of this direction in the post­war period.
 The legal principles of state support of agribusiness entities in terms of compensation for damage caused as a result of the war have been analyzed. It has been proven that the expansion of the directions for determining damage and losses caused to Ukraine as a result of the armed aggression of the Russian Federation in the direction of «damage caused to personal peasant farms and/or farms registered as natural persons - entrepreneurs», as well as the approval of the methodology for determining this damage is a progressive step in the direction of realizing the right of these subjects of the agricultural sector to compensation for the damage caused to them by the war and will contribute to post-war reconstruction.

МЕТОДИЧНІ ТА ПРАКТИЧНІ АСПЕКТИ КРЕДИТНОЇ ПІДТРИМКИ ОНОВЛЕННЯ ОСНОВНИХ ЗАСОБІВ ПРОМИСЛОВИХ ПІДПРИЄМСТВ

Purpose. In market conditions of business, the competitiveness of enterprises is largely determined by the condition of their fixed assets. The need to replace outdated technologies and equipment with modern ones requires the availability of appropriate financial resources. Inadequacy of own internal sources of investment for the renewal of fixed assets encourages enterprises to widely use external, in particular, credit. At present, in the economic theory and practice of management, there is no clearly developed mechanism for investing in the renewal of fixed assets with the involvement of credit resources. Inadequate development of such issues as the choice of a profitable loan option, the optimal loan rate, the terms and conditions of loan repayment, calls for the development of methodical and practical approaches to effective investment in the renewal of the fixed assets of enterprises. Design/methodology/approach. The article uses the discounting method and the balance sheet method for calculating and analyzing the parameters of the process of attracting credit resources. The method of economic-mathematical modeling was used to study the influence of the use of borrowed funds in investing in the renewal of fixed assets on the pace of development of production potential. Findings. The article considers a number of problems of a methodological and practical nature regarding investment support for the renewal of fixed assets of enterprises, in particular with the involvement of credit resources. The parameters of the loan attraction process, which determine its effectiveness for the enterprise, are analyzed. The most important of these parameters include: the term of the loan; interest rate for the loan; loan payment amounts. To determine the size of the payment for the loan, the appropriate ratio based on the use of compound interest was considered. Derived dependencies for calculating the annual payment for the loan, the annual payment from one monetary unit of the loan, as well as the total amount of funds that must be paid for the entire period of the loan. The values of these parameters are calculated depending on the value of the credit rate and the credit term, which makes it possible to quantitatively assess their trends. The results of the calculations are presented in tabular form. The impact of attracting credit funds in investments for the renewal of fixed assets was studied by modeling this process. An approach to determining the marginal interest rate at which it is still profitable for the enterprise to attract loan funds is proposed. For this purpose, appropriate computer calculations were carried out. Calculations were carried out for the option of fixed assets renewal with own funds, as well as with the involvement of a loan at various interest rates. An important conclusion was made that the dynamics of production development depends on the relationship between the interest rate and the growth rate of capital investments in the basic version, when production development is carried out only at the expense of own investment funds. Practical implications. The methodical and practical results obtained in the research process can be used in the selection of credit support options for the renewal of fixed assets and the development of specific measures aimed at improving the investment activity of industrial enterprises. Originality/value. The article quantitatively evaluates the parameters of credit support for the fixed assets renewal of enterprises. By means of economic-mathematical modeling, the impact of attracting loan funds on the dynamics of changes in the production potential of the enterprise was analyzed.

Antecedents of Loan Recovery of Higher Education Loans in Kenya

Purpose: The primary source of funding for higher education in Kenya is the Higher Education Loans Board (HELB). Failure to repay loans by university graduates poses a significant challenge, hindering the availability of financial resources for other deserving students. This lack of loan recovery undermines the sustainability of the education fund, consequently preventing many loan applicants from obtaining the financial support intended to cover their educational expenses. The default rate for student loans in Kenya stands at 40%. The main aim of this research was to examine the factors influencing the recovery of higher education loans in Kenya. Specifically, the study aimed to identify the demographic, economic, and loan repayment factors that impact the recovery of these loans.
 Methodology: The investigation centered on quarterly data spanning a decade (2012 to 2022) obtained from the Higher Education Loans Board. The data collection encompassed loan repayment factors, economic indicators, demographic characteristics, and loan recovery statistics for higher education loans. The study was based on secondary data sourced from quarterly reports of the Higher Education Loans Board spanning the same ten-year period (2012 to 2022). The data was analyzed by use of descriptive and inferential statistics since the secondary data is a time series in nature. A 0.05 significance level (95% confidence interval) was the error variance used. Results were then presented in tables, diagrams and charts.
 Results: Given the economic factors, the findings revealed that inflation rate has a negative (-0.117) and statistically insignificant (p > 0.05) relationship with loan recovery of higher education loans in Kenya. The correlation between the unemployment rate and loan recovery for higher education loans in Kenya was observed to be negative (-0.012) and found to be statistically insignificant (p > 0.05). Similarly, the relationship between economic growth and loan recovery for higher education loans in Kenya exhibited a negative trend (-0.114), which was also statistically insignificant (p > 0.05). Examining demographic factors, the study revealed that income level demonstrated a positive association (1.181) that was statistically significant (p < 0.05) in connection to the recovery of higher education loans in Kenya. On the other hand, the relationship between Educational Level and loan recovery for higher education loans in Kenya was positive (0.482), it was deemed statistically insignificant (p > 0.05). Turning attention to the loan repayment factors, it was uncovered that the lending interest rate displayed a significant negative correlation (-2.761) with the amount of unrecovered loans, which was statistically significant (p < 0.05). In contrast, penalty exhibited a beta coefficient of -0.016, indicating a negative relationship, although this relationship was found to be statistically insignificant (p > 0.05) in terms of its impact on the loan recovery of higher education loans in Kenya.
 Unique contribution to theory, policy and practice: To enhance the effectiveness of loan repayments, the study proposes that HELB should adopt more stringent policies and regulations, aiming to ensure prompt and efficient loan recovery processes. The study recommends HELB alongside the Ministry of Finance and Ministry of Education to develop and promote financial literacy programs that target borrowers to improve their understanding of loan repayment obligations, interest rates, and financial management. The study recommends the strengthening of Financial Aid Programs which can include increasing the availability of grants and scholarships specifically tailored to support students with lower income levels or from marginalized communities