The Role of Borrower-Cosigner Kinship Relations on Loan Default

Lucia dalla Pellegrina () and Antonio Scollo
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Lucia dalla Pellegrina: University of Milano-Bicocca
Antonio Scollo: BNP Paribas

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2016, vol. 2, issue 3, No 6, 444 pages

Abstract: Abstract Using data from a leading Italian microfinance provider we investigate the effect of kinship relations between borrowers and cosigners on loan defaults. We address causality issues using an instrumental variable built on the exogenous rule imposed by the lender that requires personal guarantees for loans exceeding € 5000. Results show that the presence of closely related cosigners tends to reduce defaults. We find that this is the result of a possible combined effect of both stronger solidarity and more effective psychological pressure exerted by relatives compared to other categories of cosigners.

Keywords: Microfinance institutions; Cosigner; Repayment behavior; Loan default (search for similar items in EconPapers)
JEL-codes: F63 G2 G21 O1 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40797-016-0039-6

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