Repayment Difficulties Research Articles

Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being

Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States, but little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits combined with administrative data-sets to identify the effects of increased access to student loans on credit-constrained students’ educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment, while having no effect on homeownership or other types of debt. (JEL G51, I22, I23, I26, J24)

RELATIONSHIP BETWEEN MSMEs AND FINANCIAL INSTITUTIONS IN WEST ACEH

This study aims to analyze the relationship between Micro, Small, and Medium Enterprises (MSMEs) and financial institutions concerning loan repayment. The data used in this research is both qualitative and quantitative primary data. The study collected a sample of 100 micro and small enterprises distributed in Aceh Barat. The data analysis employed probability and binary logit models.The results of the data analysis indicate that loan repayment difficulties, interest rates, collateral, and own capital have a negative impact on MSMEs' access to financial institutions. The variable that has the most significant impact on MSMEs' accessibility to financial institutions is the interest rate, followed by collateral and own capital. To improve MSMEs' access to financial institutions, government attention is crucial. Providing low-interest credit for MSMEs, easing collateral requirements, and promoting the establishment of various Islamic financial institutions are essential steps. This is because the growth of MSMEs contributes to increased employment opportunities and economic growth.

Understanding the Challenges of the Hilsa Fishing Community in Bangladesh: The River of Life

This study examines the economic, livelihood, and social-environmental conditions of the Meghna Riverbank Hilsa fishermen in the Chandpur region of Bangladesh. The research methods encompassed household surveys, surveys conducted during fishing activities, individual interviews, focus group discussions (FGD), key informant interviews (KII), direct observation, and problem analysis with priority ranking. To gather comprehensive information about the socio-economic conditions and livelihood strategies of the Meghna Riverbank hilsa fishermen, a semi-structured interview schedule was conducted. The findings reveal that these fishermen face exploitation, financial instability, and extreme poverty, relying solely on the river for their income. They lack access to fishing equipment and land due to river erosion, and basic necessities such as family planning, health and sanitation facilities, and education are inadequate. The overall situation is further exacerbated by social and economic constraints, including a growing number of fishermen, low incomes, limited alternative sources of income, loan repayment difficulties, piracy, rising prices, and resource disputes among stakeholders. To improve their standard of living, the study recommends effective interventions, cooperation between government and non-government organizations, and meticulous execution of strategies.

Household Loan Repayment Difficulties after the Payment Moratorium : Hungarian Experience from the Covid-19 Pandemic

We examine the relationship between the widespread, long-lasting debt forbearance on household loans introduced in Hungary at the outbreak of the coronavirus pandemic and subsequent loan repayment difficulties. We estimate linear probability and logit models at the contract level. Although our method is not suitable for identifying causal effects, participation in the moratorium proves to be a strong predictor of subsequent defaults. This is true even if we take into account the wide range of relevant factors observed at the end of the general moratorium period (October 2021). Our main results show that contracts which left the general moratorium at the end of the moratorium and, within this, those that took full advantage of the programme, were on average 3.2 and 4.2 percentage points more likely to become non-performing in September 2022 than those that never participated in the moratorium. This relationship can explain almost half of the differences in default rates between the respective groups.

Impact Analysis of the Factors Affecting the Adoption of the Kisan Credit Card Scheme

The present investigation was carried out in Haryana state during 2020-2021. Logistic regression indicated that the education level and size of the owned area of the farmer positively influenced the adoption of the KCC Scheme. Mean per cent score analysis revealed that more than 70 per cent of beneficiary farmers reported significant constraints such as lengthy paperwork and difficulty in repayment of loans due to crop failure. At the same time, 80 per cent of non-beneficiary farmers encountered sub-divisions and land fragmentation. Easy access to the non-institutional loan was a significant obstruction encountered in the adoption of the KCC Scheme.

Implementation of bankruptcy instruments as a final means of overcoming the impact of the Covid-19 pandemic in Indonesia

This study aims to provide contributions and ideas in the form of efforts to prevent bankruptcy for debtors / companies affected by the COVID-19 pandemic. This is a normative juridical law research with a conceptual approach and legislation. Primary and secondary legal materials are analyzed in terms of their content. The results of the research and legal discussion show that Bankruptcy is the last legal effort in overcoming the Covid-19 pandemic in the event that the company experiences debt repayment difficulties (defaults). Efforts that can be made are by: Optimizing the application of Business Sustainability Principles; The Covid-19 pandemic is the reason for Force majeure, the importance of restructuring and renegotiation mechanisms by debtors and creditors through Postponement of Debt Payment Obligations, and Bankruptcy is the last legal remedy (ultimum remedium).

When push came to shove: COVID-19 and debt crises in low-income countries

ABSTRACT The pandemic brought to the fore the long-standing weaknesses of resolving countries’ debt repayment difficulties. This article examines the response by the G20 and the IMF in the first six months of the pandemic focusing on low-income countries. This article maps the proposals and current debate motivated by the pandemic and argues that a critical element of the dysfunctional architecture that deserves more attention is Debt Sustainability Analysis (DSA). The article analyses the characteristics of IMF loans to DSSI eligible countries, and scrutinises the IMF’s loan approval basis. The article finds that programmes were approved on the basis of sharp “V” shaped recovery and re-establishment of fiscal austerity after transitory deficit spending. As a consequence of the problems in international sovereign debt architecture, the IMF and G20 have provided piecemeal policies to address the unfolding crisis. The article suggests the problem of DSA is symptomatic of its fraught origin and concludes that along with existing proposals to improve sovereign debt architecture, the alternatives for a more suitable economic analysis ought to be revisited.

The impacts of emotions and personality on borrowers’ abilities to manage their debts

This paper examines the impacts of retail borrowers’ emotions and personality traits on their abilities to engage in appropriate responses when things unexpectedly go wrong and they get into debt repayment difficulties. We establish several scenarios where borrowers are hit with unforeseen circumstances that affect their abilities to make their loan payments and we classify and evaluate the riskiness of the strategies they state that they would adopt in those situations. Via an extensive on-line survey conducted in the UK, we show that borrowers who were most comfortable about taking on debts in the first place, those who show neurotic tendencies, and those who believe that they have control over events rather than being controlled by them, are more likely to undertake high risk strategies when faced with unforeseen issues that affect their ability to meet their debt interest and repayment costs. We also find that respondents who identify as feeling excited, alert or guilty, as well as younger borrowers and those who are single or renters, are more likely to opt for risky approaches. Our findings have potentially important implications for lenders, regulators and debt counselling services regarding the types of people who are most likely to get into debt troubles.

Repayment under Flexible Loan Contracts: Evidence based on High Frequency Data

We study repayment and delinquency in the context of an alternative financial product that enables the purchase of a large asset---a solar panel home system---while offering complete repayment flexibility. Using a large administrative data set on daily repayment of 38,400 borrowers in Tanzania over 5.5 years, we perform unsupervised pattern analysis to classify repayment behavior. We show that borrowers with fluctuating incomes use the loan's flexibility more and that farmers in particular adjust their repayment to cash flow. We further find that use of flexibility is linked to repayment difficulties, yet does not automatically lead to default. Our results indicate that low-income households can finance large assets through innovative financial approaches that allow aligning payments to financial circumstances.

An Analysis of the Reporting of Contingent Liabilities in Kenya’s Public Debt Management Legal Framework

Kenya’s ballooning public debt has been a major concern in the recent past. In fact, there are fears about the country’s debt sustainability levels. Last year, the International Monetary Fund raised Kenya’s risk of debt distress to high from moderate. What this means is that although the country is not currently facing any repayment difficulties, it may have difficulties servicing its debt due to the slowdown in economic activity. The downgrade from moderate to high risk has been attributed to the outbreak of the COVID-19 pandemic. Over the past few years, the country’s public debt has grown exponentially. The outstanding total public debt and publicly guaranteed public debt at the end of the 2019/2020 financial year was Kshs. 6.7 trillion. This is an equivalent of 65.6 per cent of the Gross Domestic Product. The percentage is way above the 50 per cent level recommended by the World Bank.The increase in public debt has also seen an increase in publicly guaranteed debt and other contingent liabilities. In the financial year 2019/2020, public guaranteed debt increased by Kshs. 5,841 million to Kshs. 165,245 million from Ksh. 159,408 million at the end of June 2019. In the same period, the government has had to pay Kshs. 661.2 million as called up guaranteed debt debts owed by public enterprises that were in financial distress. From the above, it is clear that contingent liabilities form a substantial part of the public debt. However, they are not given much attention. This paper explores the reporting of these liabilities.

Using Solar Panels for Business Purposes: Evidence Based on High-Frequency Power Usage Data

Access to electricity is typically the main benefit associated with solar panels, but in economically less developed countries, where access to electricity is still very limited, solar panel systems can also serve as means to generate additional income and to diversify income sources. We analyze high-frequency electricity usage and repayment data of around 70,000 households in Tanzania that purchased a solar panel system on credit, in order to (1) determine the extent to which solar panel systems are used for income generation, and (2) explore the link between the usage of the solar system for business purposes and the repayment of the customer credit that finances its purchase. Based on individual patterns of energy consumption within each day, we use XGBoost as a supervised machine learning model combined with labels from a customer survey on business usage to generate out-of-sample predic- tions of the daily likelihood that customers operate a business.We find a low average predicted business probability; yet there is considerable variation across households and over time. While the majority of households are predicted to use their system primarily for private consumption, our findings suggest that a substantial proportion uses it for income generation purposes occasionally. Our subsequent statistical analysis regresses the occurrence of individual credit delinquency within each month on the monthly average predicted probability of business-like electricity usage, relying on a time-dependent proportional hazards model. Our results show that customers with more business-like electricity usage patterns are significantly less likely to face repayment difficulties, suggesting that using the system to generate additional income can help to alleviate cash constraints and prevent default.

Using solar panels for business purposes: Evidence based on high-frequency power usage data

Access to electricity is typically the main benefit associated with solar panels, but in economically less developed countries, where access to electricity is still very limited, solar panel systems can also serve as means to generate additional income and to diversify income sources. We analyze high-frequency electricity usage and repayment data of around 70,000 households in Tanzania that purchased a solar panel system on credit, in order to (1) determine the extent to which solar panel systems are used for income generation, and (2) explore the link between the usage of the solar system for business purposes and the repayment of the customer credit that finances its purchase. Based on individual patterns of energy consumption within each day, we use XGBoost as a supervised machine learning model combined with labels from a customer survey on business usage to generate out-of-sample predictions of the daily likelihood that customers operate a business. We find a low average predicted business probability; yet there is considerable variation across households and over time. While the majority of households are predicted to use their system primarily for private consumption, our findings suggest that a substantial proportion uses it for income generation purposes occasionally. Our subsequent statistical analysis regresses the occurrence of individual credit delinquency within each month on the monthly average predicted probability of business-like electricity usage, relying on a time-dependent proportional hazards model. Our results show that customers with more business-like electricity usage patterns are significantly less likely to face repayment difficulties, suggesting that using the system to generate additional income can help to alleviate cash constraints and prevent default.

The Impacts of Emotions and Personality on Investors’ Abilities to Manage Their Debts

This paper examines the impacts of retail borrowers’ emotions and personality traits on their abilities to engage in appropriate responses when things unexpectedly go wrong and they get into debt repayment difficulties. We establish several scenarios where borrowers are hit with unforeseen circumstances that affect their abilities to make their loan payments and we classify and evaluate the riskiness of the strategies they state that they would adopt in those situations. Via an extensive on-line survey conducted in the UK, we show that borrowers who were most comfortable about taking on debts in the first place, those who show neurotic tendencies, and those who believe that they have control over events rather than being controlled by them, are more likely to undertake high risk strategies when faced with unforeseen issues that affect their ability to meet their debt interest and repayment costs. We also find that respondents who identify as feeling excited, alert or guilty, as well as younger borrowers and those who are single or renters, are more likely to opt for risky approaches. Our findings have potentially important implications for lenders, regulators and debt counselling services regarding the types of people who are most likely to get into debt troubles.

Repayment under Flexible Loan Contracts: Evidence from Tanzania

We study repayment and delinquency in an innovative loan contract that offers borrowers a wide range of flexibility. Using a large administrative dataset, we perform unsupervised pattern analysis to study how borrowers repay within the framework of this loan. We identify eight clusters that can be grouped into three distinct repayment types. We show that borrowers with fluctuating incomes and limited consumption smoothing resources use the loan’s flexibility more and that farmers in particular adjust their repayment to cash flow. Finally, we show that high use of the loan’s flexibility is associated with repayment difficulties, yet typically does not result in eventual default; whereas borrowers who face repayment difficulties that are likely driven by economic shocks face a high probability of default.

Paraguay

In March 2020, Paraguay was hit by the Covid-19 epidemic, which has created fiscal and balance of payments needs. The authorities’ policy response to the epidemic has been timely, but limited access to financing and a weakened fiscal position constrain the ability to pursue a deeper emergency response. Crisis response: To contain the epidemic and mitigate the impact on the private sector Paraguay has adapted an emergency package at a cost of about 2½ percent of GDP that will boost health care spending, expand the social safety net and provide emergency loans for small enterprises. It has also lowered policy rates, allowed banks to restructure loans to private sector companies that are in repayment difficulties, and postponed collection of taxes and user fees for 2 months.

Taking it to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being

Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States. However, little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits, together with administrative schooling, earnings, and credit records, to identify the effects of increased student borrowing on credit-constrained students’ educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment while having no effect on homeownership or other types of debt. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Two Sticks and One Carrot: Public Debt and the International Financial Commission in Greece 1854-1859

The present article constitutes a contribution to the monetary and financial history of Greece by introducing to a wider audience the Financial Commission that was established in the late 1850s following the longstanding lack of payment by Greece on its foreign loans. The port of Piraeus was twice blockaded in the 1850s and the removal of the occupying armies was conditional on the establishment of a Financial Commission. The paper is oriented around a neglected primary document of Greek financial history, the final report of the Commission that was appointed between 1857 and 1859 and was composed of the representatives of the governments of Britain, France and Russia. The paper examines how creditors ascertained how much to demand when repayment difficulties arose and created pressure to secure their own policy objectives in the region.

Parametric Conditions of High Financial Risk in the SME Sector

The sector of SME is the major force for the national economic and social development. Financial risk is one of the key threats to the activity of small and medium enterprises. The most common manifestation of the financial risk of SMEs is difficulty in financing the business and lack of funds for development. Banks are unwilling to grant loans to such companies. Moreover, it is the rising operating costs that cause shrinking profits, which may result in corporate debt, difficulty in debt repayment, and consequently, high financial risk of these entities. Numerous differences in conducting the activity of small and large enterprises intensify this risk and mean that the model of credit financing for companies is not adjusted to the capabilities and principles of the operation of small enterprises. Therefore, risk management is one of the most important internal processes in small and medium enterprises. The identification of factors that affect the level of financial risk in these entities is therefore crucial. The main objective of this research was to analyze the impact of selected parametric characteristics of the SME sector on the intensity of financial risk they take. This objective was accomplished on the basis of the survey with the participation of Polish SMEs. In order to test the adopted research assumptions, the linear regression model was used with four continuous variables for each type of the identified financial risk. Based on the final research results, the logit model was obtained for the risk of insufficient profits. It was indicated that both the internationalization of the company and the ability to manage risk are the only factors that affect a high level of risk of low income. The article ends with the discussion and the comparison with some previous research in this area.

College Student Debt and Anticipated Repayment Difficulty

This study analyzes factors associated with anticipated difficulty with repayment of debt accumulated during college using a basic model of credit risk that includes socialization processes influencing college student financial decisions. The empirical analysis uses data from the 2010 Ohio Student Financial Wellness Study. Results provide evidence of male overconfidence in financial decision making, as males are less likely than females to predict repayment difficulties. Socialization process variables, including financial management practices, financial parenting communication, and expected economic returns from education, are strongly associated with anticipated debt repayment difficulty. Inclusion of these process variables in the model results in loss of explanatory power of many of the traditional individual success variables, such as grade-point average, and graduation plans.

What matters more for South African households’ debt repayment difficulties?

ABSTRACTWhile the increased access to consumer credit has helped many families improve their welfare, the rising repayment burdens upon a background of chronically low saving rates have generated concerns that South African families are becoming ever more financially fragile and less able to meet their consumer debt repayment obligations. Using data from the Cape Area Panel Study, this article investigates whether consumer debt repayment problems are better explained by excessive spending which leaves households financially overstretched or by negative income shocks. The results indicate that households are significantly more likely to be delinquent on their financial obligations when they suffer negative events beyond their control rather than due to the size of the expenditure burden. This suggests that consumer repayment problems are likely to endure even when consumers borrow within their means. Thus, regulatory efforts to improve mechanisms for debt relief might be more meaningful than restrictions on lending.