Do collateral theories work in social banking ?

Leonardo Becchetti and Melody Garcia
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Melody Garcia: Faculty of Economics, University of Rome "Tor Vergata", http://www.ceistorvergata.it
Authors registered in the RePEc Author Service: Maria Melody Garcia Schustereder

No 131, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We study the determinants of collateralisation on the universe of credit files of non individual borrowers in a “Grameen’s type” Bank (Banca Popolare Etica) which aims to reconcile economic sustainability with the pursuit of social goals. The extremely high share of uncollateralized loans (around 42 percent) appears consistent with a multistakeholder (customer oriented) approach which internalises the welfare costs of default of collateralised borrowers. Econometric findings document that collateralisation depends positively on ex ante borrower’s risk (proxyed by non performing past track record) and, negatively, on relationship lending. The incentive effect seems to work since collateralised borrowers are ex ante, but not ex post, riskier.

Keywords: collateral; bank-firm relationship; credit risk. (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-11-07, Revised 2008-11-07
New Economics Papers: this item is included in nep-mfd and nep-rmg
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:131

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