Small Loans Research Articles

Analysis of COVID-19 Impact on Micro, Small, and Medium Enterprises (MSMEs) Credit Distribution in East Java Banks

Research aims: The purpose of this study was to determine the credit distribution level used as working capital assistance for Micro, Small, and Medium Enterprises (MSMEs) during the COVID-19 pandemic.Design/Methodology/Approach: This study used a sample of 8 cities/regencies in East Java. Meanwhile, the Micro, Small, and Medium Enterprises (MSMEs) credit recipients were the population of the sample areas. This research's analysis model was panel data regression (generalized least square) by considering the emergence of heteroscedasticity in cross-section data between regional objects. The control variables outside the COVID-19 were the BI rate, third-party funds (TPF), and inflation.Research findings: This study’s results showed that the COVID-19 pandemic had a significant negative impact only on medium-sized business loans, while micro and small business loans are more resilient. Besides, Micro, Small, and Medium Enterprises (MSMEs) credit was significantly positively influenced by TPF; inflation did not affect credit; the BI rate only negatively affected medium-sized business credit.Theoretical contribution/Originality: Studies on Micro, Small, and Medium Enterprises (MSMEs) credit-related to economic phenomena and monetary policy have been widely carried out. However, the catastrophic virus that causes long-term economic uncertainty and impacts banks and Micro, Small, and Medium Enterprises (MSMEs) still requires in-depth study. Also, this study employed the GLS model that considers heteroscedasticity, which is still rarely used in previous studies.Practitioner/Policy implication: This research can be essential information for the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or OJK) and Bank Indonesia (BI) in policymaking, both regulatory aspects and bank liquidity provision, in stimulating Micro, Small, and Medium Enterprises (MSMEs) credit, especially in the COVID-19 pandemic era.Research limitation/implication: The impact of COVID-19 on Micro, Small, and Medium Enterprises (MSMEs) loans is still classified based on micro, small and medium. It is still not grouped based on the Micro, Small, and Medium Enterprises (MSMEs) business sector in various cities and regencies in East Java. The analysis has not been clustered based on the spatial concentration of the Micro, Small, and Medium Enterprises (MSMEs) recipient areas.

Socio-economic constraints on camel production in Pakistan\u2019s extensive pastoral farming

The present research is aimed to evaluate the diverse husbandry practices, ethno-veterinary practices, socio-economic status and distressing constraints of camel pastoralists inhabiting desert (Thal) areas of Pakistan, where they maintain herds of Marecha and Barela dromedaries in extensive production regimes. For this purpose, 200 pastoralists were selected at random to fill out an on-site questionnaire. According to the farmers’ responses, it was perceived that their living status had improved in the last decades due to the progressive optimization of camel productivity and herdsmen responsiveness. In contrast, calf mortality rates, some traditional husbandry practices and the lack of market investments continued to be the major constraints affecting camel overall production. Ethno-veterinary medicines are widely applied as primary health care, thus influencing the general health, production potentials and relief of camels in the study region. With this scenario, concerned stakeholders and authorized institutions must re-evaluate the urgent needs of indigenous communities; their education and husbandry skills to promote economic/ financial support in low-income remote areas. In turn, traditional communities will be adapted to the changing socio-economic and cultural values with regard to camel husbandry and welfare. Current societal perceptions and demands within this livestock production industry, where camels are conceived as a sustainable food security animal, if accomplished to the highest possible extent, will increase effectiveness of the camel value chain and breeders’ quality of life will be noticeably enhanced. However, this success could be multiplied if government may devise community education, veterinary cover, marketing facilitates and interest-free small loans for pastoralists.

Measuring the Labor Market at the Onset of the COVID-19 Crisis

We use traditional and non-traditional data to measure the collapse and partial recovery of the U.S. labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence that high UI replacement rates drove job losses or slowed rehiring.

Relative Risk of Intimate Partner Violence According to Access to Instrumental Social Support Among Pregnant Women in Eswatini Whose Partners Do and Do Not Drink Alcohol.

Intimate partner violence (IPV) affects one in three women around the world and is the tenth leading cause of death for women in Africa aged 15 to 29 years. Partner alcohol use, access to social support, and poverty all affect women's likelihood of experiencing violence. We sought to understand how partner alcohol use differentially affected the hypothesized association between a protective role of instrumental social support (in the form of food or financial loans) against IPV for a clinic-based sample of women in the Kingdom of Eswatini (formerly known as Swaziland). We use cross-sectional data from a parent study of women recruited from urban and rural antenatal clinics in Eswatini (n = 393) to calculate the association between experiencing IPV and perception of one's ability access to large cash loans, small cash loans, and food loans-both for the full sample and stratified by partner alcohol use. In fully adjusted models, the perception that one could access loans of food or money was associated with decreased relative risk of IPV for all women. These associations were modified by partner alcohol use. Access to instrumental support (loans of food or money) is associated with decreased risk of IPV, but this association varies according to the type of loan and whether or not a woman's partner drinks alcohol. Economic empowerment interventions to reduce IPV must be carefully tailored to ensure they are appropriate for a woman's specific individual, relationship, and community context.

Stress Tests, Entrepreneurship, and Innovation

Abstract This article shows that postcrisis stress tests have negative effects on entrepreneurship and innovation at young firms. Exploiting unique data on business-related home equity loans in Home Mortgage Disclosure Act, I show that stress-tested banks strongly cut small business loans secured by home equity, an important source of financing for entrepreneurs. Lower credit supply leads to a relative decline in entrepreneurship in counties with higher exposure to stress-tested banks. The decline is stronger in sectors with a higher share of young firms using home equity financing, that is, in which the reduction in credit hits hardest. More-exposed counties also see a decline in young firms’ patent applications as well as labor productivity, reflecting young firms’ disproportionate contribution to growth.

Regressive Mortgage Credit Redistribution in the Post-Crisis Era

Abstract We document four secular trends about U.S. mortgage origination by traditional and FinTech lenders after the 2008-2009 financial crisis. First, since 2011, the overall number, size, and approval rate of small and medium-sized loans have been decreasing over time, relative to large loans. Second, the largest lenders redistribute their lending the most. Third, this loan-size redistribution of credit increases in the size of the lender. Fourth, the effects are stronger for mortgages further away from the conforming loan limit(s) in both directions. We argue that the supply of credit drives these secular trends, and we assess several potential economic mechanisms.

Lower Bank Capital Requirements as a Policy Tool to Support Credit to SMEs: Evidence From a Policy Experiment?

Starting in 2014 with the implementation of the European Commission Capital Requirement Directive, banks operating in the Euro area were benefiting from a 25% reduction (the Supporting Factor or hereafter) in their own funds requirements against Small and Medium-sized enterprises (SMEs hereafter) loans. We investigate empirically whether this reduction has supported SME financing and to which extent it is consistent with SME credit risk. Economic capital computations based on multifactor models do confirm that capital requirements should be lower for SMEs. Taking into account the uncertainty surrounding their estimates and adopting a conservative approach, we show that the SF is consistent with the difference in economic capital between SMEs and large corporates. As for the impact on credit distribution, our difference-in-differences specification enables us to find a positive and significant impact of the SF on the credit supply

Excessive focus on risk? Non‐performing loans and efficiency of microfinance institutions

AbstractMicrofinance is a banking market in which operating costs are high, while non‐performing loans (NPLs) rates are low. While the existing literature tends to explain that the high operating costs arise from the provision of small loans, we argue that excessive efforts to control loan losses can also be a contributing factor. Therefore, this article investigates the relationship between NPLs and the cost efficiency of microfinance institutions (MFIs). Using a unique global sample of rated MFIs and applying stochastic frontier analysis together with Granger‐causality test and generalized method of moments (GMM), we find, in contrast to positive linear relationship evidence in commercial banking studies, a nonlinear (U‐shape) relationship between operating costs and NPLs. This implies that MFIs need to balance their cost efficiency with asset quality.

The Influence of Financial Performance on People’s Business Credit in Banking Companies for the Period 2010-2019

Bank Rakyat Indonesia, Bank Mandiri, and Bank Negara Indonesia are some of the banking companies that provide small business loans for MSME players with a view to find out the Capital Adequacy Ratio, Non-Performing Loan and Return On Asset in banking companies that distribute people’s Business Loans for the period 2010 - 2019. Researchers used Quantitative research methods with Descriptive and Verification research methods. People’s Business Credit is one of the programs issued by the government to help small communities that have problems with capital. The KUR program is the solution, with a fairly fast, easy process and very little interest. Research result on variables Capital Adequacy Ratio, Non-Performing Loan, and Return On Asset in Banking Companies for the period 2010 - 2019. The results of the study on the Capital Adequacy Ratio variable did not effect on the level of trust and Non-Performing Loan variable there was a negative and significant level on the Business Credit to Banking Companies for the period 2010-2019.

Global inequities and healthcare disparities: can they be eliminated ethically?

Purpose The purpose of this paper is to comprehensively explore and propose solutions to global economic inequities and disparities, with a particular focus on healthcare. This paper also aims to explore whether drastic reductions of inequality are justified in terms of conventional economic theory, and whether ending inequality can be viewed as ethical through certain lenses. Design/methodology/approach To seek the response to those questions, the paper uses Pareto optimality; Hicks–Kaldor model; Millian utilitarianism; the ethical theories developed by John Rawls in his 1971 work on ethics as well as his 1999 Law of People; and the capability approach developed by Noble Laureate economists Amartya Sen. As demonstrated, those equalizing works cannot support a policy that would advocate an end to global inequities. Those theories also propose no practical solutions for the end of those extreme inequities. Thus, the paper attempts to present other solutions. Findings This paper discusses two theories that are very helpful in supporting those without much wealth. Mohammad Yunus’ Grameen Bank and its provision of small free-interest loans to poor businesses (in particular women) in Bangladesh has been very successful. Another alternative advocating interest-free banking that was proposed by the proponents of binary economics is discussed. Originality/value The author believes the arguments used to support the theses of this paper be unique and novel.

The Impact of Federal Home Loan Bank (FHLB) Advances on Small Business Lending by Community Banks—2010–2016

Abstract In this paper, we examine the relationship between small business loan growth and growth in core deposits and Federal Home Loan Banks (FHLBs) advances from 2010 to 2016. Controlling for other effects, we find that the relationships between small business loan growth is positively and significantly related to both FHLB advance growth and core deposit growth, with the coefficient on advance growth being significantly larger than the coefficient on core deposits over the entire sample period. We also tested whether this relationship changed after 2014:3 reflecting the Federal Reserve’s relaxation of the regulatory burden on smaller banks. We find that the relationship between loan growth and core deposit growth became more positive after the change, but the relationship between loan growth and FHLB advance growth did not. As a result, we could no longer reject the hypothesis that the coefficient on core deposit growth was equal to the coefficient on FHLB advance growth after 2014:3. This provides some empirical support that the regulatory changes in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA) influenced small business lending by strengthening the impact of the growth in core deposits on the growth of small business lending, complementing the work of Bordo and Duca (2018) that changes in DFA had some unintended negative consequences for lending to small businesses. It also suggests that lowering the regulatory burden faced by community banks (which have a larger proportion of core deposits to total assets than non-community banks) could improve the incentive to increase small business lending. It also implies that FHLB advances remain an important funding tool at the margin to give commercial banking organizations greater liquidity and flexibility in funding their balance sheets.

Small Loans in the Economic Life of Late Fifteenth-Century Cities

Today micro-credit market has five characteristic features: 1. the small value of the loan; 2. the short-term nature of the repayment, 3. mostly by instalments; 4. the renunciation of real estate securities; and 5., usually, the not requiring a prescribed end-use. It is for this reason that small loans were one of the most widespread means of economic exchange in late Medieval urban societies. However, it is still necessary to define what smallness means in this context. This is a tricky task, since small loans usually become visible only when repayment is at risk, when claims are legally enforced by debt recognisance or following the seizure of property. These two legal instruments - debt recognisance and property seizure - provide the focus of this paper as I explore how their social meaning differed radically in practice.

Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment

We experimentally study the impact of substantially larger enterprise loans, in collaboration with an Egyptian lender. Larger loans generate small average impacts, but machine learning using psychometric data reveals dramatic heterogeneity. Top-performers (i.e., those with the highest predicted treatment effects) substantially increase profits, whereas profits for poor-performers drop. The magnitude of this difference implies that an individual lender’s credit allocation choices matter for aggregate income. Evidence on two fronts suggests large loans would be misallocated: top-performers are predicted by loan officers to have higher default rates; and, top-performers grow less than others when given small loans, implying that allocating larger loans based on prior performance is not efficient. Our results have important implications for credit expansion policy and our understanding of entrepreneurial talent: on the former, the use of psychometric data to identify top-performers suggests a pathway towards better allocation that revolves around entrepreneurial type more than firm type; on the latter, the reversal of fortune for poor-performers, who do well with small loans but not large, indicates a type of entrepreneur that we call a “go-getter” who performs well when constrained but poorly when not.

Does the Community Reinvestment Act Increase Small Business Lending in Lower Income Neighborhoods?

We estimate the impact of the Community Reinvestment Act (CRA) on small business lending in lower-income neighborhoods. Using 2004-2016 panel data on census tracts, we apply a combined regression discontinuity and fixed effect method. We find that the number of small business loans increases by about 3 to 4 percent and the total dollar amount of small business loans by about 6 to 10 percent in tracts becoming treated by the CRA. The results are robust along many dimensions and suggest that the CRA has a positive impact on access to finance for small businesses in lower income areas.

ОСОБЛИВОСТІ КРЕДИТУВАННЯ КОМЕРЦІЙНИМИ БАНКАМИ ТА МІКРОФІНАНСОВИМИ ОРГАНІЗАЦІЯМИ

The article considers the interaction of microfinance organizations with banks. The features associated with lending by commercial banks and microfinance organizations, which have now gained significant popularity, are indicated. The development of microfinance organizations is associated with certain restrictions for the population with low incomes in providing them with credit resources by commercial banks. In today's economic environment there is an increased demand for borrowed funds, in traditional banks, as financial institutions with regulated lending conditions, the loan is approved when the borrower submits a pledge, so that if the borrower is unable to repay the loan with interest, the pledge provided by the borrower , was withdrawn by the bank and used as a way to repay the loan. But there is still a large part of the population that is unable to provide collateral to advance a bank loan. And because of this we can conclude that banks can not fully meet the demand for debt capital for the impoverished, and therefore as an alternative to banking lending was introduced the concept of microcredit, which allows people to advance loans without any collateral. Unlike traditional loans, where the loan is provided only if the borrower provides something as collateral and the appropriate amount of interest determined by the bank, microcredit does not require any collateral in exchange for the loan, but is provided at much higher interest rates rates than conventional bank loans. The definition of microcredit is a small loan that is usually financed for entrepreneurial projects, impoverished people and groups, especially in poor or developing countries. Microcredit is part of the microfinance industry. Microfinance is a way of providing loans, credits, insurance, access to savings accounts and remittances to small businesses and entrepreneurs in underdeveloped parts of the world. Beneficiaries of microfinance are those who, as a rule, do not have access to traditional financial resources like ordinary people, but compared to ordinary loans, interest rates on microcredit are slightly higher than on ordinary loans.

Frontier Dynamic Research on China’s “Three Rural” Financial Development under the Background of Inclusive Finance: Based on Bibliometric Analysis

In recent years, the central government has continued to focus on the issues of “three rural”, and the financial development of “three rural” under the background of inclusive finance has increasingly become a topic of common concern for scholars. This study supplements the relevant research literature after the “19th National Congress of the Communist Party of China” report, especially since the “Village Revitalization Strategic Plan”, and provides a certain reference for the theoretical research and practice of “three rural” financial development. Based on CNKI data, applying Cite space bibliometrics software, the research results were visualized and analyzed by bibliometric method, cluster analysis method and knowledge mapping technology. From the perspective of literature review on the “three rural” financial development, this paper integrated research to excavate research status, identify research interests and reveal development trends. Results show that banking institutions and academic institutions are high-yielding institutions, and teamwork has not yet formed; inclusive finance, rural finance, targeted poverty alleviation, small loans, rural revitalization, etc. are the focus of research attention; digital inclusive finance and rural revitalization are relatively new research contents.

Why are there Racial Disparities in the Small Business Loan Market

We investigate patterns of racial bias in small business loans denial rates in the U.S. across different credit risk scores. We motivate this inquiry with a simple and generalizable statistical discrimination model where banks observe noisy signals of creditworthiness and hold prior beliefs of repayment probability based on the applicant’s group. Our model predicts that differences in approval rating across groups are more pronounced at middle range values and disappear at very high and very low credit scores. Using data constructed from the 1998 Survey of Small Business Finances and the restricted access Kauffman Firm Survey we find disparities in loan approval ratings between Black and White entrepreneurs in intermediate risk categories but not for the best and worst categories.

Personal Income Taxes and Small Business Lending

I investigate whether and how personal income taxes impact bank lending to small businesses. My empirical design exploits staggered statutory changes of state personal tax in the U.S. as identification and compares loans granted in geographically adjacent counties across state borders with relative tax changes during 2001-2018. I find that higher personal tax rate has significantly negative effects on loan outcomes, including smaller loan size, shorter maturity, higher default probability and higher charge-off ratio. I further find significantly smaller number and amount of small business loans in high-tax localities. These novel evidences suggest personal tax-induced distortion in borrower’s creditworthiness constrains local banks’ lending to small businesses.

Bank Mergers, Acquirer Choice and Small Business Lending: Implications for Community Investment

We examine the effects of bank merger and local market characteristics on local small business lending. Mergers involving small, in-state acquirers are positively associated with small business loan (SBL) originations in counties where target banks are located. Conversely, mergers involving large, out-of-state acquirers are associated with fewer SBL originations. The analysis suggests that the results are driven by acquirer’s choice of target. Small and in-state acquirers target banks that focus more on SBL and targets with strong relationships while large, out-of-state acquirers pursue better performing banks with stronger balance sheets and less focus on SBL. Results are particularly strong in counties with a large number of small firms. Post-merger activity supports banks expanding on their acquisition strategy decisions. The findings suggest that acquirer strategy is important for evaluating the impact of acquisitions on local community development and that one-size-fits-all policy solutions for bank mergers may not produce common local outcomes.

Startup Toutiao: Definition and Impact on Industry 4.0 in Indonesia

Today's startups must at least have a “disruptive” nature for the existing market / industry or even create a new industry with new innovations with more appropriate problem-solving solutions in society. In the early stages, startup companies' expenses tend to outweigh their revenues as they develop, test and market their ideas. Because of this, they often need financing. Startups can be funded by traditional small business loans from banks or from the private or private sector. A startup that can prove its potential will be able to attract even greater capital financing, this is one of the potential causes of the increase in the valuation of a startup to become a Unicorn, when they show a 'disruptive' effect in society and provide solutions to solving problems to meet community needs more easily , then investors will invest with a large value and not just one large company, they will divide the share ownership presentation according to the investment value.