Loan Recovery Research Articles

Reforms in higher education: The case of Chile in the 1980s

The impact of the 1981 reforms on the system of higher education in Chile is described and analyzed. The system has been diversified by the encouragement of private universities, the creation of professional institutes and the establishment of centers for technical formation. Changes in the funding system have, however, led to problems with student loan recovery and to private universities concentrating on subjects with low costs. Though the participation rate has greatly increased, the existence of empty places, especially in the newer private universities, is evidence of over-provision.

Providing rural credit in southern India: A comparison of commercial banks and cooperatives

AbstractThis paper contrasts the recent experiences of two different institutions in providing credit and savings facilities in the countryside of Tamil Nadu, southern India. Ever since the late‐1960s, there has been a rising demand for credit to finance investment in agriculture. This has been reinforced by Government policy over the last two decades, and especially since 1980, to provide credit both to priority activities, including agriculture, and to disadvantaged rural groups. Part of that policy has been to encourage the commercial banks to offer services in the countryside, alongside the previously well‐developed network of cooperatives offering formal rural credit.The commercial banks have had considerable success in expanding their network of branches, and in increasing bank deposits and loans in rural areas. Operating as corporate bureaucracies, the banks have been able to expand without being crippled in the process. On the other hand, their institutional strength has meant that Government credit policy has been implemented cautiously. The agricultural credit cooperatives, no newcomers to the countryside, have still to fulfil their long‐declared function of providing short‐term credit for crop production to the majority of agricultural households. Loan recovery by the cooperatives has been weak. The cooperatives have suffered partly from the internal contradictions inherent in any cooperative structure imposed upon the peasantry, from major flaws in the organizational structure of Tamil Nadu cooperatives, as well as from the increasing appropiation of the cooperatives for party political ends.The contrasting experiences of the two different institutions in providing rural credit illustrate how policy applied through different institutions can produce quite different outcomes. They also demonstrate how changes in the socio‐political environment, neither immediately obvious nor predictable, can critically affect policy results.

Evaluating loan collection performance: An Indonesian example

This paper discusses the evaluation of loan collection performance in a specialized term-credit program introduced in Indonesia to promote the development of small-scale enterprises. After outlining pertinent characteristics of the credit program, the available collection performance indicators are described and appraised. It is shown that program managers and bankers had access to quite a lot of data on collection performance, but none that provided meaningful information for evaluating loan recovery. The paper then examines sources of the evaluation problem, and suggest methods for developing more accurate and less ambiguous indicators of portfolio quality, loan recovery rates, and ultimate bad debt costs.

Financing Minor Irrigation Projects: A Decision Theoretic Framework to Tackle Uncertainties

Minor irrigation schemes have been assigned an important role in irrigation development in the Fifth Five-Year Plan. Financial institutions such as the Agricultural Refinance and Development Corporation and banks have stepped up loan disbursements to finance the construction of dug wells, dug-cum-bore wells, and tubewells. One of the constraints in lending for minor irrigation schemes has been the uncertainty in the recovery of loans owing to failed wells. The authors of this paper provide a decision theoretic framework to tackle this uncertainty. The framework consists of (1) alternatives, (2) possible events which can take place in case of each alternative, (3) possibilities associated with each event, and (4) a defined criterion of choice. The interactions between various elements are illustrated with two examples based on data from Mehsana district in Gujarat.

Agricultural Credit and Bank Nationalisation

Co-operative societies, the traditional agency still continued to play an important role in the disposetion of credit to farmers. The commercial banks though they have come into the picture only recently in regard to direct finance to agriculture have fared well and in due course can be expected to pay a bigger role as they gain ex- perience and certain concessions are granted as in the case of co-operatives. The co- operatives have in no way been affected by the impact of bank credit. The banks serve as a supplementing agency rather than competing with co-operative agency. Regarding recovery of loans in certain cases co-operatives are in better position as they can recover quickly by instituting arbitration proceeding.

A CRITICAL EVALUATION OF THE LEGAL FRAMEWORK FOR SME’s LOAN REDEMPTION IN NIGERIA

Small and medium scale enterprises (SMEs) scheme has been recognised as a vehicle for rapid sustainable economic development, industrialisation, employment generation, poverty alleviation, to mention but a few. No doubt, the country is in dire need of these indices of peoples’ welfare. Yet, conventional banks are reluctant to grant credit facilities to SMEs in order to boost their capital base and sustain their enterprises. The reason is that the existing legal frameworks are inadequate in ensuring efficient, effective and prompt loan recovery by the banks from the SMEs. This is more so that the beneficiaries of the SMEs loans are not required to pay interests when repaying the loan. Consequently, the positive effects of viable, effective and efficient SME schemes are not felt in the country. Based on this premise, this paper critically evaluates the adequacy or otherwise of legal/policy frameworks on SME loan redemption in Nigeria. To achieve this, it assesses the enforcement mechanism against beneficiaries of the SMEs scheme. The paper finds that the legal framework for redeeming loans against SMEs in Nigeria is inadequate owing to weak and ineffective enforcement mechanisms. It concludes that there is a need for a dependable, viable, effective and justly-balanced legal framework that would ensure smooth and reliable loan redemptions from SMEs.