Repayment Problems Research Articles

Belt and Road countries’ external debt and China’s new strategies

ABSTRACT Since the Belt and Road (B&R) initiative was put forward in 2013, China has signed cooperation documents with more than 150 countries and more than 30 international organizations. The Chinese government and banks have lent a large amount to B&R countries for infrastructure development, and China’s foreign contracted projects and trade with these countries have increased significantly. However, many B&R countries face severe debt repayment problems, and China has actively engaged in debt relief. To avoid debt crises, China needs to adopt new B&R development strategies, including putting B&R development firmly on commercial principles, reducing government loans to B&R countries and restructuring debt, expanding trade with B&R countries, increasing imports from debtor countries, and encouraging private enterprises’ direct investment in these countries.

Effects of Digital Credit on Small Business Performance in Obunga, Railways Ward, Kisumu County, Kenya.

Small and Micro Enterprises play an important role in economic development of any nation by harnessing human capital, use of raw materials and technology. They require enough funds to facilitate expansion of operations, develop new products, hire new staff and acquire new facilities. Lack of capital and financing conversely has been identified as a major factor affecting their performance leading to their failures. Innovations in financial technology in the form of digital credit have taken advantage of these financing gaps and have come up with powerful tools to mitigate financing barriers faced by small businesses. This study sought to address the effects of digital credit on small business performance in Obunga, Railways ward in Kisumu, Kenya. The business performance was determined through operating cash flow, Sales volume and Net profit margin. Asymmetric Information theory and Default Risk Theory of Credit were selected to anchor this study. The study adopted descriptive research design. The target population was 454 Small and Micro Enterprises while the sample size was 212 Small and Micro Enterprises. The study adopted both stratified and simple random sampling techniques. Primary data was collected using structured questionnaires and interviews. Secondary data was collected through reviewing available records regarding digital credit and small business performance. The study adopted content validity. The data collected was analyzed using the Statistical package for social sciences version 24.0. Data was analyzed using descriptive statistics. The study findings conclude that the performance of the SMEs could be seen from profit margins, sales when they access digital credit.The study in addition suggests that the fast growth of fintechs had increased the cost of borrowing to SMEs and their repayment problems even though they offer flexible loan contracts to SMEs who have the ability to determine their own preferred loan repayment schedule. The study recommends the managers and owners of SMEs in Obunga ward to adopt an entrepreneurial mind-set that would support their ability to better gain financial access from various financial institutions Based on the study findings, it is also recommended that the government mobile loan institutions should consider lowering the costs involved in lending the credit. Lastly, the study recommends the managers and owners of SMEs in Obunga ward to make use of available flexible repayment options to borrow what their businesses actually require.

Impact of Monitoring Activities and Social Ties on the Repayment Problems of group-Based Lending-Evidence from Vietnam

This study examines how monitoring activities by group leaders and social ties within groups influence repayment rates in the Vietnam Bank for Social Policy’s group lending program in the Mekong Delta. Data used in this paper was obtained from a survey of 675 members from lending groups in 5 provinces in the Mekong Delta in September 2022. The analysis finds a negative relationship between the leader’s social ties and repayment rates, implying that strong social ties might hinder enforcement. However, the impact of leader monitoring, member-level monitoring, and social ties was not statistically significant. Interestingly, group characteristics like size and regulations may play a more significant role in reducing repayment problems.

Green management, access to credit, and firms' vulnerability to the COVID-19 crisis.

The online version contains supplementary material available at 10.1007/s11187-023-00759-1.

Role of social capital in reducing the level of non-performing loans

In various studies, social capital is believed to be the answer to problems related to loan repayment problems. The purpose of this study was to find out the reasons for the successful financing of the Mawar Emas program in reducing NPF numbers in West Nusa Tenggara. The author interviewed MES secretaries, mosque administrators, beneficiaries, NTB Sharia Banks, and academics from several universities using a qualitative descriptive method. To support these data, the authors obtained a two-year payment document for the Mawar Emas program. This study found that Mawar Emas financing does not burden customers because of small dependents, the group leader is responsible for collecting and paying debts to the NTB Sharia Bank, NTB Sharia Bank and the Islamic Economic Community (MES) to train and assist mosques and fund recipients, MES and mosques collaborate to hold bazaars for debtor businesses to increase their profits.

Unmet financial obligations and alcohol-related mortality: A nationwide register-based follow-up study

This study sets out to explore whether experiencing financial indebtedness is related to alcohol-related mortality. For this purpose, people aged between 20 and 64 having a registration date for a debt in the Swedish Enforcement Authority's register during 2015 (n = 48,541) were followed up for a five-year period for alcohol-related mortality and were compared with a sample from the general Swedish population (n = 261,148). On the basis of logistic regression analysis, it is shown that people who had experienced financial indebtedness were almost two and a half times more likely to suffer from alcohol-related death than those who had not lived through this experience (OR = 2.43), controlling for several demographic, socio-economic, and health conditions prior to the date of the registration at the Enforcement Authority. The results provide support for the notion that debt repayment problems may, in itself, be an important indicator to consider in the study of alcohol-related harm. Consequently, debt counselling and other programs directed toward mitigating debt-related stress may play an important role in alleviating the adverse effects of indebtedness.

Housing Cost Stress of Mortgagers and Tenants in Poland

Abstract The economic problems of mortgage takers, especially in light of the global financial crisis, is a very important issue, both from the point of view of housing policy and the stability of the banking sector. The analysis of the situation of mortgagors is usually limited to determining the percentage of mortgages in default. We compared the revealed mortgage repayment problems among Poles (arrears) with the unrevealed ones (such as high housing cost burden, inability to bear unexpected expenses), which we defined as housing cost stress. Next, we compared these problems with those of tenants at market rates. We found that, although we observe only a small percentage of mortgagors who are in arrears with their housing costs in Poland (about 3%), a large proportion of borrowers (about half of them) are in a difficult financial situation. At the same time, we noticed that their situation is still better than that of market rent tenants, because only one in five renters did not experience problems with covering housing costs. Among tenants, singles were much more likely to suffer from housing cost stress.

AN INVESTIGATION OF BANKS’ NON-PERFORMING LOANS – A STUDY OF MICROFINANCE BANKS FROM MICROECONOMIC AND MACROECONOMIC PERSPECTIVE TOWARDS SUSTAINABILITY & FINANCIAL INCLUSION

Banks’ failure and financial crises are consequences of non-performing loans, and it is of great importance when it comes to microfinance banking system because it is more than mere loan repayment problems. Rather, it is an important determining factor of their failure or survival in market. The purpose of this study is to examine the impact of bank specific (micro-level factors) as well as macro-economic factors on NPLs to understand their impact and effect on microfinance banks. Microfinance banking sector has significant contribution in terms of financial inclusion in an economy. Sustainable Development Goal number 8 calls for expanding financial services to people (typically low-income) which encourages economic growth. This research employs published secondary data from 2011-2020 of micro-economic and macro-economic factors as independent variables and NPLs as dependent variable. The present study applies regression analysis to determine the explanatory power of the independent variables in explicating the NPLs. The findings of this empirical research contribute in guiding bankers to develop better understanding of their performance in terms of efficiency, riskiness, profitability and further it facilitates investors to take precision decisions.

Socio-Economic Determinants of Loan Repayment Capacity of Somali Microfinance Clients in Kebridahar Town, Somali Regional State, Ethiopia

Somali microfinance finance institute (SMFI) was established to provide inclusive financial services to rural and urban poor households with the ultimate goal of poverty alleviation in the Somali regional state. Even though SMFI is working better to upgrade itself to a licensed bank-Shabelle Bank and is showing livelihood improvement for poor households in the Somali region so far, loan repayment problems are currently the major challenge facing the institute, which can discourage it from promoting and extending credit to poor people in the future. Therefore, this study intended to assess the determinants of the loan repayment capacity of borrowers in the Kebridahar District of Korahey Zone. Out of the total 4330 borrowers received from the SMFI Kebridahar branch, 188 representatives were selected by dividing the borrowers into two strata, in terms of loan payment status defaulters and non-defaulters. Data were collected from both primary and secondary sources. The primary data was collected from a sample of 188 borrowers using a two-stage sampling method. Descriptive statistics and an econometric model were used to analyze the data. The result of descriptive statistics revealed that Education level, household head experience in credit, family size, marital status, loan diversion, occupation type, and getting trained were shown significant differences between defaulters and non-defaulters. According to the logistic regression model result out of nine variables included in the model, Age, education level, and access to training of household head positively and significantly affected the loan repayment capacity of the borrowers while marital status (get-married) and loan size were found to be negative and significantly affecting the repayment capacity of the borrowers. Therefore, this study recommends that the microfinance and other regional concerning offices should give attention to these significantly affecting variables for further strategic and policy decisions.

Protection of Corporate Creditors’ Interests under Subscription System

At the end of 2013, the reform of China’s corporate capital system established the full subscription system design. This reform, however, is far from ideal. It also introduces new issues, such as bogus companies, which have a new impact on the market economy. The reason for this is that it only eliminates the minimum registered capital and first capital contribution requirements, leaving other systems that are actually matched with the paid-in system unchanged, resulting in the old and new systems forcibly grafted together being unable to adapt to each other in practice. In the real world, such a corporate capital arrangement is certain to have issues. Given the company’s debt repayment problem, which is caused by the current full subscription system, it is advisable to establish and improve the company’s credit and information publicity system, appropriately expand the application scope of the disregard of corporate personality system, and constantly improve the company’s registered capital urging system, in order to ensure the enrichment of the company’s capital, better safeguard the interests of the company’s creditors, and avoid the company’s debt repayment problem.

Microfinancing and Entrepreneurship Growth among Women in Ogun State, Nigeria

Entrepreneurship has continually been a tenacious tool in responding to global poverty. The last few decades recorded tremedous activities of women entrepreneurs. Funding is a critical challenge to present and prospective women entrepreneurs. Microfinancing contitutes a principal source of easy access to funds. Microfinancing comprises financial and non-financial services which could possibly be a driving force to women entreprenuship and empowerment. However, the presence of microfinancing is though visible but there is lack of necessary investigation revealing the impact of microfinancing on entrepreneurial activities among women. Also, repayment problems pose threats of continuity to both microcredit institutions and entrepreneurs. A number of repayment strategies are in existence but there is lack of necessary investigation showing the influence of these repayment strategies on entrepreneurship growth among women. The focus of this study was to evaluate how Microfinancing has influenced entrepreneurship growth among women. This study adopted survey research design and convenience sampling technique. The study concluded that microfinancing has a significant impact on entreprenuship growth among women in Ogun State, Nigeria. Moreover, the developed model would serve as a useful inspiring construct for researchers.

Financial indebtedness and suicide: A 1-year follow-up study of a population registered at the Swedish Enforcement Authority.

Background:Economic hardship is an established suicidogenic factor. However, very little is known about whether financial difficulties in terms of debt problems, specifically, is related to suicide. This would seem to be an important research gap, not least at a time when the repercussions of the global financial crisis are still being felt by many people.Aims:This study sets out to examine whether experiencing financial indebtedness is related to suicide.Methods:For this purpose, people aged between 18 and 64 with a registration date for a debt in the Swedish Enforcement Authority register between 2015 and 2017 (n = 180,842) are followed up for a 1-year period for death by suicide and compared with a sample from the general Swedish population (n = 928,265). The analysis is based on penalized maximum likelihood logistic regressions.Results:Those who had experienced financial indebtedness were two and a half times more likely to commit suicide than those who had not lived through this experience (OR = 2.50), controlling for several demographic, socio-economic, and mental health conditions prior to the date of the registration at the Enforcement Authority.Conclusion:Debt repayment problems have a significant and detrimental impact on individuals’ risk of committing suicide, even when several other socioeconomic risk factors are controlled for. The results reinforce the importance of ongoing attempts to remove the issue of debt problem from its status as a rather hidden suicidogenic risk factor.

Loan Settlement Performance of Oromia Credit and Saving Share Company Borrowers and Its Determinants in Ada’A Barga District, Oromia National Regional State, Ethiopia

In developing countries like Ethiopia Microfinance institutions are playing an essential role in poverty reduction; to provide the provision of micro-credit, savings, and other services to the poor that are excluded by the commercial banks for collateral and other reasons. However, there is a loan repayment problem, which discourages rural finance organizations from promoting and extending credit. Therefore, this study focuses on identifying the factors affecting the loan repayment performance of OCSSC borrowers in Ada’a Barga district, Oromia National Regional State, Ethiopia. Purposive and random sampling technique was used to select 139 sampled respondents. Both primary and secondary data sources were used for this study. Descriptive statistics and t-test and chi-square test analyses were employed to compare defaulters and non-defaulters with the explanatory variables. Also, binary logit econometric model was used to examine the factors that affect credit repayment performance of the selected sampled household borrows of OCSSC. The result showed that out of 139 chosen respondents, 56 were defaulters and 83 were non-defaulters. A total of twelve explanatory variables were included in the empirical model and out of the total hypothesized explanatory variables involved in the model, age, educational level, celebration of social ceremony and participation in off/non-farm activities were positively and statistically significantly affected loan repayment performance at 1% significance level. Moreover, livestock ownership positively affected loan repayment at 5% 1% significance level. On the contrary purpose of borrowing and family size was negatively and significantly affected loan repayment performance at 5% and 10% significance level. Therefore, the study recommended that the identified significant variables have to be a springboard for further interventions by financial institutions, stakeholders and policymakers to come with a breakthrough to significantly decrease or even avoid defaulting problems., Keywords: Binary logit; defaulters; loan repayment; non-defaulters; OCSSC DOI: 10.7176/JESD/12-15-04 Publication date: August 31 st 2021

Highways to Hell? Paths Towards the Formal Financial Exclusion: Empirical Lessons of the Households from Northern Hungary

Whenever a household faces lack of banking payment services and access to funding, it often constraints their everyday activities and the chance to avail the financial services again. Our study explores the possible explanations of why a household becomes financially excluded in an underdeveloped area of Northern Hungary. By using a questionnaire (n = 502) in the spring of 2019, we conducted a covariance-based SEM analysis for detecting the key reasons. We find that the low level of income, high ratio of financial problems and high intensity of short-term borrowings equally and directly contribute to the financial exclusion of the households. Furthermore, we could not confirm any direct effects of the banking service availability, although bank services significantly influence an intermediary factor, which is the increasing repayment problem in the social environment. Our results verify the responsibility of the regulation in lending and debt collection to achieve a better social policy.

Loan Repayment Performance of Oromia Credit and Saving Share Company Borrowers and Its Determinants in Ada’A Barga District, Oromia National Regional State, Ethiopia

In developing countries like Ethiopia Microfinance institutions are playing an essential role in poverty reduction; to provide the provision of micro-credit, savings, and other services to the poor that are excluded by the commercial banks for collateral and other reasons. However, there is a loan repayment problem, which discourages rural finance organizations from promoting and extending credit. Therefore, this study focuses on identifying the factors affecting the loan repayment performance of OCSSC borrowers in Ada’a Barga district, Oromia National Regional State, Ethiopia. Purposive and random sampling technique was used to select 139 sampled respondents. Both primary and secondary data sources were used for this study. Descriptive statistics and t-test and chi-square test analyses were employed to compare defaulters and non-defaulters with the explanatory variables. Also, binary logit econometric model was used to examine the factors that affect credit repayment performance of the selected sampled household borrows of OCSSC. The result showed that out of 139 chosen respondents, 56 were defaulters and 83 were non-defaulters. A total of twelve explanatory variables were included in the empirical model and out of the total hypothesized explanatory variables involved in the model, age, educational level, celebration of social ceremony and participation in off/non-farm activities were positively and statistically significantly affected loan repayment performance at 1% significance level. Moreover, livestock ownership positively affected loan repayment at 5% 1% significance level. On the contrary purpose of borrowing and family size was negatively and significantly affected loan repayment performance at 5% and 10% significance level. Therefore, the study recommended that the identified significant variables have to be a springboard for further interventions by financial institutions, stakeholders and policymakers to come with a breakthrough to significantly decrease or even avoid defaulting problems., Keywords: Binary logit; defaulters; loan repayment; non-defaulters; OCSSC DOI: 10.7176/RJFA/12-9-05 Publication date: May 31 st 2021

Household’s Overindebtedness during the COVID-19 Crisis: The Role of Debt and Financial Literacy

The COVID-19 pandemic has shown how important it is to prepare one’s own financial budget for the unexpected loss of income. In this dimension, the financial education of the society plays an invaluable role. It allows us to account for events that may adversely affect personal finances in our budget management decisions. Therefore, the aim of the article is to check whether households with a higher level of financial and debt literacy have better management skills from the perspective of a household’s budget, which in the face of a crisis reduces the risk of individuals not paying their liabilities. Thus, at the turn of June and July 2020, we conducted surveys among 1300 Polish citizens. Using the multinomial logistic regression, we show that people with a higher financial and debt literacy are less affected by overindebtedness. During the crisis, people who have a higher debt literacy are better prepared to manage credit liabilities; in this situation, financial literacy is less important. In addition, the type of credit experience turned out to be significant. Respondents who have experience with consumer loans (potentially high-margin products) are more likely to have debt repayment problems than those with mortgage loans experiences.

The Re‐making of the Turkish Crisis

ABSTRACTBy the end of 2018 Turkey had entered a new economic crisis and a lengthy recession period. In contrast to the previous financial crises of 1994, 2001 and 2009, when the economy shrank abruptly with a spectacular collapse of asset values and a severe contraction of output, the 2018 economic crisis was characterized by a prolonged recession with persistent low (negative) rates of growth, dwindling investment performance, debt repayment problems, secularly rising unemployment, spiralling currency depreciation and high inflation. The mainstream approach attributes this dismal performance to a lack of ‘structural reforms’ and/or exogenous policy factors. However, this analysis shows that the underlying sources of the crisis are to be found not in the conjunctural cycles of reform fatigue, but rather in the post‐2001, neoliberal, speculation‐led growth model that relied excessively on hot‐money inflows and external debt accumulation. This article argues that following the post‐2001 orthodox reforms, a foreign capital inflow‐dependent, debt‐led and construction‐centred economic growth model dominated the economy and caused a long build‐up of imbalances and increased fragilities that led to the 2018 crisis. The Covid‐19 pandemic of 2020‒21 further exposed these fragilities, pushing the economy back into a recession with rapid capital outflows causing another round of sharp currency depreciation.

Parental Support, Savings, and Student Loan Repayment

Using unique survey and administrative data from Canada, we document that parental support and personal savings substantially reduce student loan repayment problems. Developing a model of student borrowing and repayment, we show that nonmonetary costs of applying for income-based repayment assistance are critical to understanding our findings. Furthermore, we show that eliminating these costs may be inefficient. Empirically, we show that expanding Canada’s Repayment Assistance Plan to automatically cover all borrowers could reduce program revenue by half over early repayment years. Finally, we show how student loan programs can be more efficiently designed. (JEL G51, I22, I23, I28)

Delegated monitoring in crowdfunded microfinance: Evidence from Kiva

We study the role of delegated monitoring in crowdfunded microfinance. We use data from Kiva, a crowdfunding platform, where crowds lend to borrowers through microfinance institutions (MFIs) instead of lending directly. These MFIs monitor debt contracts on behalf of crowds. We find that borrowers who are more intensely monitored by MFIs are more likely to repay crowdfunded loans on time. Monitoring is particularly important in reducing repayment problems of individual loans rather than group-based loans. Monitoring has a stronger impact in less competitive lending markets. We also find that when lending to borrowers, crowds are attentive to the loan-administering MFI's ability to monitor loans.

Importance of Subjective Financial Knowledge and Perceived Credit Score in Payday Loan Use

This study examined the factors associated with consumers’ decisions to use payday loans. Using a sample of 24,201 respondents from the 2015 National Financial Capability Study (NFCS), structural equation modeling was used to analyze the relationships among the variables. The results indicated that payday loan use was associated with a series of consumers’ socio-psychological factors, including financial knowledge, perceived credit score, credit-card payment problems, and having emergency funds. The findings suggested that, to improve borrowing decisions and industry practices, discussions about consumers’ payday loan use and its underlying repayment problems should encompass policy intervention and institutional attention, rather than focusing on behavioral modification at the individual level alone.